VA Loan During Chapter 13 Bankruptcy: What You Need to Know

This blog will discuss qualifying for a VA loan during Chapter 13 Bankruptcy mortgage guidelines. Many of our clients at Gustan Cho Associates are told they do not qualify for a VA loan during Chapter 13 Bankruptcy. Many homebuyers are told they can’t qualify for a VA loan during Chapter 13 Bankruptcy.  You need to have been in Chapter 13 for one year with 12 timely payments and get trustee approval, explains John Strange, a senior loan officer at Gustan Cho Associates.

Borrowers can qualify for a VA loan during Chapter 13 Bankruptcy repayment plan one year after filing for Chapter 13. You need to have made 12 timely payments with no late payments.

Trustee approval is required. It needs to be manual underwriting. They are told by lenders they can only qualify for VA loans two years after Chapter 13 Bankruptcy discharge. This is not true. Homebuyers can qualify for a VA loan during Chapter 13 Bankruptcy. Chapter 13 Bankruptcy does not have to be discharged. In the following paragraphs, we will cover VA loan during Chapter 13 Bankruptcy.

VA Loan During Chapter 13 Bankruptcy

Are you considering getting a VA loan while going through Chapter 13 bankruptcy? It might seem tough, but it’s definitely doable. Let’s walk through what you need to know to make it happen.

What Is The VA Funding Fee?

The VA Funding Fee is a one-time cost that can be rolled into the balance of the VA loan. The VA Funding fee is similar to the upfront FHA mortgage insurance premium. The VA funding fee is a fund that the VA uses to insure VA loans that default. The Veterans Administration has much more lenient agency mortgage guidelines than other loan programs.

Veterans are required a one-time VA funding fee if they use a VA loan. The purpose of the VA funding is to help fund the VA government guarantee VA loan insurance program to fund VA loans that default.

Most veterans who buy or refinance a home with a VA loan must pay a one-time funding fee. This fee helps protect the VA loan program when mortgages default. Veteran homebuyers with a Certificate of Eligibility can qualify for VA Loan During Chapter 13 Bankruptcy, one year into the Chapter 13 Repayment Plan. To qualify for VA Loan During Chapter 13 Bankruptcy, the borrower must have the approval of the Chapter 13 Bankruptcy Trustee, which is normally not a problem.

Eligibility Requirements

1. One Year in Repayment Plan: To qualify for a VA loan during Chapter 13 bankruptcy, you need to follow a few important rules. First off, you should have been sticking to the Chapter 13 repayment plan for at least a full year. This shows that you’re committed to handling your debts responsibly.
2. Timely Payments: It is very important that all of your payments were made on time over the past 12 months. This part is important because it proves to lenders that you’re reliable and can manage your payments well, even during tough times.
3. Trustee Approval: Lastly, you can’t just decide on your own that you’re ready for this kind of loan. You need to get the green light from your bankruptcy trustee. They’re like the gatekeepers in this situation, ensuring you’re truly in a stable enough position to take on a mortgage during this phase of your financial journey.

Process and Steps

1. Consult with a VA Loan Specialist: When looking into getting a VA loan during Chapter 13 bankruptcy, it’s important to start by chatting with a VA Loan Specialist. This step is crucial because you’ll get to talk about your unique case and check if you’re eligible for a loan. They understand the ins and outs of getting a VA loan during Chapter 13 bankruptcy and can guide you on the right path.
2. Gather Required Documentation: Next, you’ll need to gather all the necessary paperwork. This typically includes showing that you’ve been making your payments on time and also getting a letter from your trustee. This documentation is key because it proves to lenders that you’re managing your current financial obligations well, even during bankruptcy.
3. Manual Underwriting: Lastly, be ready for manual underwriting. Unlike the usual automated approval systems, manual underwriting involves a person reviewing your application in detail. This is often the case for those in Chapter 13, as automated systems might not accurately assess your situation. It might seem daunting, but it’s just another step in proving that you’re a reliable borrower, capable of taking on a VA loan during Chapter 13 bankruptcy.

Guidelines and Restrictions

When considering getting a mortgage, you should keep a few key things in mind, particularly if you’re interested in exploring options like a VA Loan During Chapter 13 Bankruptcy. It sounds complex, but we’ll break it down into simpler terms.

• Credit Score: First, your credit score plays a big role. Ideally, you’d want to have a credit score of at least 580. It’s like the grade you need to pass a really important test. Some loan providers might be stricter or more lenient, but 580 is a good benchmark to aim for.
• Debt-to-Income Ratio: We do not have any debt-to-income ratio requirement on VA loans. Just go off Automated Underwriting System approval. As long as the Veteran borrower has plenty of VA Residual Income, we can get an approve/eligible per AUS FINDINGS with debt-to-income ratios as high as 60% DTI.
• Proof of Income: Lastly, proof of income is super important. Lenders want to see that you have a steady paycheck coming in, which tells them you’re good for the money. It’s like showing your parents you have a steady job before they cosign on a car loan for you. Consistent proof of income is your way of showing lenders you’re financially stable.

Now, these guidelines become even more crucial if you’re navigating through a situation like a VA Loan During Chapter 13 Bankruptcy. Such circumstances require a clear demonstration of financial responsibility and stability. It’s all about showing that, despite past challenges, you’re on firm financial footing now.

Approval Chances For VA Loan During Chapter 13 Bankruptcy

A few things can boost your odds when you’re hoping to get the green light for a loan.

Factors Influencing Approval

First up, if the person in charge (that’s your trustee) thinks you’re good to go, that’s a big plus. Also, if you’ve been nailing your payment deadlines and you’ve got a steady job with income flowing in, your chances are looking better.

Lender Policies

Now, it’s key to remember that not all lenders are created equal, especially when we’re talking about getting a VA Loan During Chapter 13 Bankruptcy. You want to find a lender who knows how to navigate these unique challenges.

The agency pays the lender a portion of any loss if the borrower defaults. This guarantee allows homeowners to skip the down payment.

Looking for someone who’s got plenty of experience with VA loans in the middle of Chapter 13 can make a huge difference. They’ve seen it all before, and they know what it takes to work through the process successfully.

Documentation and Conditions

When you’re going through the process of getting a VA Loan During Chapter 13 Bankruptcy, it’s crucial to keep track of some specific documents and understand the certain conditions that come along with it.

Required Documents

Firstly, you need to have a few essential papers on hand. These include proof that you’ve been keeping up with your payments on time without fail, a letter of approval from your trustee, which acts like a green light for your loan application, and solid proof of your income to show that you can indeed afford the loan you’re applying for.

Manual Underwriting

This process isn’t just your run-of-the-mill check; since you’re applying for a VA Loan During Chapter 13 Bankruptcy, your loan will go through manual underwriting. This means that someone will take a closer and more detailed look at your application. They’ll comb through all your documents more thoroughly than usual, so it’s key to be prepared and have everything in order.

It’s all about ensuring you’re in a stable enough position to manage the loan, and the extra steps are there for your protection as much as the lender’s.

Keeping things transparent and having all your documents ready can make this intricate process smoother. By tackling these steps one by one, you’ll be on your way to securing a VA loan, even amidst Chapter 13 bankruptcy proceedings. Remember, it’s all about maintaining open communication, keeping your documents organized, and staying patient through the manual underwriting process.

Rental Verification Requirements on VA Manual Underwriting

Verification of Rent is only valid if the renter can provide 12 months of canceled checks paid to their landlord. Or bank statements reflecting outgoing transfers of the same amount of their rental payments to their landlord’s bank account. If the renter rents from a registered property management company, then the lender provides a VOR Form to the property manager. Verification of Rent is required on all manual underwrites on VA loans.

Verification of rent is only valid if the borrower can provide 12 months of canceled checks along with a Rental Verification Form completed, dated, and signed by the landlord.

The landlord with provide the verification of rent form that need to get completed and signed by the property owner. The property management manager can complete it and can be used in place of the 12 monthly checks or 12 months of bank statements. Gustan Cho Associates can waive the verification of rent for borrowers who have been living rent-free with family to save money for their home purchase and closing costs.

Waiting Period After Chapter 13 Bankruptcy Discharged Date

There is no waiting period after a Chapter 13 Bankruptcy discharge date. Any bankruptcies without two-year of seasoning after the discharge date needs to be manually underwritten. In this blog, we will discuss VA-FHA Chapter 13 Mortgage Guidelines. VA and FHA loans are the only two loan program that allows borrowers to qualify for home loans during Chapter 13 Bankruptcy repayment plan and there is no waiting period after discharge.

Benefits of Filing Bankruptcy

Bankruptcy is a consumer’s right to protect themselves by creditors and gives them a chance of discharging their debts and/or reorganizing their finances. It is a federal law. Dale Elenteny, a senior mortgage loan originator at Gustan Cho Associates says the following about VA loan during Chapter 13 Bankruptcy:

Consumers can qualify for a mortgage and have a chance to become property owners again after bankruptcy. Government and conventional loans require a minimum waiting period requirement after bankruptcy.

Gustan Cho Associates offers non-QM loans where there are no minimum waiting period requirements after bankruptcy, foreclosure, deed in lieu of foreclosure, short sale. Debt collectors can no longer come after you after filing bankruptcy. Bankruptcy is not the end of the world. Actually, it is the opposite. It gives consumers a fresh start in life. Consumers can start re-establishing their credit right after their bankruptcy discharge.

Impact on Bankruptcy

According to a New York Federal Reserve Bank study, consumers filing bankruptcy often learn from their past debt problems and are better off after their discharge. There are many folks who have 700 plus FICO credit scores one year after filing bankruptcy. There are no more debts that will be hounding consumers after bankruptcy.

Taking a VA Loan During Chapter 13 Bankruptcy means you might need to tweak how you pay back your debts. Think of it like adjusting the puzzle pieces to ensure everything still fits together perfectly.

Having chats with your trustees is important because they’re your guide through this whole process. They’ll help ensure that getting a VA loan fits into your existing plan without messing anything up. Remember, taking out a VA Loan During Chapter 13 Bankruptcy isn’t just about getting new keys; it’s about making sure those keys don’t jumble up the progress you’ve already made.

Finding the Right Lender

When you’re on the hunt for the right lender, especially when you’re trying to get a VA Loan During Chapter 13 Bankruptcy, it’s smart to focus on lenders that know the ins and outs of VA loans throughout this process. You want to keep an eye out for those specialists who won’t add extra hurdles or requirements to your VA Loan During Chapter 13 Bankruptcy.

Choosing lenders who don’t tack on additional stipulations—what some call overlays—can make your experience smoother.

In everyday talk, you’re looking for lenders who make things easy, with fewer hoops to jump through, especially when you’re dealing with something as specific as a VA loan during Chapter 13. Getting a VA loan during Chapter 13 bankruptcy is possible with the right preparation and guidance. Ensure you meet the eligibility requirements, gather all necessary documentation, and work with experienced lenders to navigate the process smoothly.

How Chapter 13 Bankruptcy Works

Chapter 13 bankruptcy restructures a person’s Debt through a three- to five-year repayment plan. The federal court approves the plan, and the borrower makes monthly payments to a trustee, who then pays their creditors. This arrangement protects borrowers from foreclosure and lets them keep secured assets, including a home.

Why a VA Loan Matters During Bankruptcy

Getting a VA loan while you’re still in Chapter 13 is possible, and the case numbers are growing. The VA program lets veterans access low-interest financing even under court supervision conditions.

Eligibility Criteria to Watch

The borrower must meet certain conditions to access a VA loan in Chapter 13. Active or retired servicemembers must already be jointly eligible, and surviving spouses must meet the VA’s generally three-year widow rule. Regardless of the case type, the court must apply the plan, and months must be marked clearly-dripped on an on-time payment history, all capped. The real lender’s FHA, them, differently. diagram lenders under pa-lo is months case in lender.

Challenges You May Face

• VA Form 26-8970 Issues.
• You must submit the VA’s Form 26-8970 while your case is open.
• It got to if the court hasn’t entered a discharge MT via a home. The loan form can stall on the VA if the processing vet is still in court, or a friend too—the lender requests.
• The trustee completed the absent caregiver issues.
• Trustee guidelines Twist Track.

Steps to Improve Your Odds of Success

• File timely if dismissed. The VA helps with a loan appraisal—the lender.
• Swap to zero debt ratio makers if Credit releases you on time for all periods,

What Is Chapter 13 Bankruptcy?

Chapter 13 bankruptcy—sometimes called a “wage earner’s plan”—lets people with a steady paycheck reorganize debts into a monthly payment plan that usually lasts three to five years. Unlike Chapter 7, which sells assets to pay creditors, Chapter 13 aims to repay debts without selling major belongings, keeping your home, car, and other vital property safe.  

Can You Get a VA Loan During Chapter 13 Bankruptcy?  

A VA loan can be obtained while still in a Chapter 13 bankruptcy. However, there are key steps you must follow. The VA does not say no to loans during bankruptcy, but lenders and court trustees set clear rules to ensure you have enough Income to cover your payments.  

Eligibility Requirements for a VA Loan During Chapter 13  

VA Loan Eligibility Basics  

To be considered for a VA loan, you must first meet these general VA guidelines: you need to be a qualifying veteran, an active-duty soldier, or a surviving spouse, plus you should hold a Certificate of Eligibility (COE). You must also satisfy the lender’s credit standards, prove your Income, and keep the debt-to-income (DTI) ratio within limits. Finally, the property must be your primary residence.

Additional Requirements During Chapter 13 Bankruptcy

Applying for a VA loan while in a Chapter 13 bankruptcy doesn’t stop the process. It just adds a few steps. Here’s what you need to know:

• Court Approval: You need permission from the bankruptcy court before taking on a new mortgage loan.
• You often file a simple motion, showing how the loan fits your current plan without throwing things off balance.
• Trustee Consent: The trustee overseeing your repayment plan must agree that you can fit the new mortgage payment into your budget without missing plan payments.
• Minimum Repayment Period: Generally, lenders will consider your situation only after you’ve made on-time payments on your bankruptcy plan for 12 months.
• Stable Income: Showing a steady paycheck that can stretch to cover the mortgage and your bankruptcy payment is a must.
• Acceptable Credit: VA loans are forgiving.
• However, most lenders will still want a credit score in the 580 to 620 range and an on-time record for everything since you filed for bankruptcy.

Challenges of Securing a VA Loan During Chapter 13

• Lender Hesitation: Chapter 13 sits on many lenders’ warning screens.
• They see it as a person still in the recovery phase.
• That can slow things down and make it a little tougher to find a VA-approved lender willing to step in while the bankruptcy is still open.
• The search could take extra time, but the loan is not impossible if you meet the other criteria.

Debt-to-Income (DTI) Ratio Risks

Your DTI shows how much of your Income goes to monthly debts, so it’s a big deal. In Chapter 13, your repayment plan counts as Debt. This can push your DTI past the VA’s usual limit of 41%. To be safer, lenders often ask for an even lower DTI to reduce their risk.

Fewer Loan Choices

Some lenders place tougher rules on Chapter 13 borrowers. You might see higher interest rates, extra paperwork, or both. This tightens your options and makes the loan more expensive.

Easy Steps to Boost VA Loan Approval Odds

Step 1: Keep Chapter 13 Payments on Track

Always pay your Chapter 13 bills on time. Lenders and the bankruptcy court will check your payment track record to see how responsible you are.

Step 2: Use a VA-Approved Lender

Not every lender knows the ins and outs of VA loans for borrowers in bankruptcy. Find a VA-approved lender who has experience. They can walk you through the loan process and help you talk to the bankruptcy court.

Step 3: Get Court and Trustee OK

Talk to your bankruptcy attorney before applying. They’ll help you file a motion with the court that asks for loan approval. You’ll need to share documents, including the loan details, to show you can pay.

Step 4: Improve Your Financial Profile

Strengthening your application is key:

• Reduce Debt: Pay off debts that are not flagged in bankruptcy.
• A lower debt-to-income (DTI) ratio looks great to lenders.
• Boost Income: Take on a weekend gig, freelance online, or work consistent overtime to increase your paycheck.
• Build Credit:  In Chapter 13, on-time payments set the foundation.
• Pay your phone bill, car note, and other bills to improve your score.

Step 5: Get Pre-Approved

Securing a VA loan pre-approval tells sellers you mean business. It locks in your budget and shows you’ve done your homework. When you apply, the bank checks your whole financial picture to confirm your eligibility, smoothing the closing phase.

Benefits of Pursuing a VA Loan During Chapter 13

No Down Payment

The VA usually asks for no down payment. For someone in Chapter 13, you won’t drain your emergency fund to make a hefty cash deposit.

Flexible Credit Requirements

The VA looks beyond your score and focuses on your recent payment history. This is still a plus if you’ve had bumps in your Credit, unlike a conventional loan that usually needs a great score.

Lower Interest Rates

Many VA loans offer lower rates than the market average. That means a smaller monthly payment and a welcome break when managing a strict bankruptcy plan.

Common Mistakes to Avoid

Applying Without Court Approval

Getting a loan without first asking the bankruptcy court is asking for trouble. Your application might be tossed out, or you could spark legal headaches. Always get the court’s thumbs-up before you move ahead.

Overlooking Hidden Costs

A VA loan isn’t just about the interest rate. Closing costs, property taxes, and homeowners’ insurance can quickly pile up. If you ignore them, you could find it hard to keep up with your Chapter 13 plan.

Choosing the Wrong Lender

Not every VA lender is a friend to Chapter 13. Pick the wrong one, and you’ll face delays or a loan denial. Spend a little time finding a lender who knows the inside and out of Chapter 13 rules.

Frequently Asked Questions

How Long Must I Be in Chapter 13 Before Applying for a VA Loan?

• Most lenders look for a solid 12 months of on-time Chapter 13 payments.
• That said, individual lenders might have their own rules, so it’s better to double-check.

Will a VA Loan Affect My Bankruptcy Plan?  

• A VA loan can get approved if it won’t mess with your repayment plan.
• Both the bankruptcy court and the trustee will peek at your budget to ensure the new mortgage won’t stretch your finances too thin.

Can I Use a VA Loan to Refinance in Chapter 13?

• Yes, a VA Interest Rate Reduction Refinance Loan, or IRRRL, can work, but you must get the bankruptcy court’s OK first.
• You’ll also have to show that the new loan saves money or makes your situation easier.

Getting a VA loan in Chapter 13 bankruptcy is tough, but doable if you plan smart. Know the eligibility rules, show that your Credit is recovering, and get court permission if you’re refinancing. Team up with a lender who knows VA loans, keep your financial situation strong, and check in with your bankruptcy lawyer. Stick with the plan, and you’ll stack the odds in your favor to use a VA loan and get closer to your homeownership dreams, even while you’re rebuilding your finances.

FAQs: VA Loan During Chapter 13 Bankruptcy: What You Need to Know

Can I get a VA loan during Chapter 13 bankruptcy?

• If you have been enrolled in a Chapter 13 bankruptcy plan for a year, made 12 on-time payments, and obtained approval from your trustee, you may be eligible for a VA loan.

What Are The Basic Eligibility Requirements For a VA Loan During Chapter 13 Bankruptcy?

• To qualify, you need to have been in the repayment plan for one year, made timely payments for the past 12 months, and have trustee approval.

Do I Need Trustee Approval To Get a VA Loan During Chapter 13 Bankruptcy?

• Yes, trustee approval is required to get a VA loan during Chapter 13 bankruptcy.
• They ensure you’re in a stable position to take on a mortgage.

What Documents Do I Need to Apply For a VA Loan During Chapter 13 Bankruptcy?

• You will need proof of timely payments, a trustee approval letter, proof of income, and a VA Certificate of Eligibility.

How Does Manual Underwriting Affect My Application For a VA Loan During Chapter 13 Bankruptcy?

• Manual underwriting involves a detailed review of your financial situation, which can be beneficial since automated systems might not accurately assess Chapter 13 cases.

What is The VA Funding Fee, And Do I Have to Pay It?

• The VA Funding Fee is a one-time cost to help fund the VA loan program. Most veterans pay this fee, which can be included in the loan balance.

What is The Impact of Taking a VA Loan on My Chapter 13 Bankruptcy Plan?

• Taking a VA loan during Chapter 13 bankruptcy might require adjustments to your repayment plan, so it’s important to work closely with your trustee.

Can My Credit Score Affect My Chances of Getting a VA Loan During Chapter 13 Bankruptcy?

• Yes, a minimum credit score 580 is generally required, though higher scores can improve your chances of approval and better loan terms.

Are There Specific Lenders That Offer VA Loans During Chapter 13 Bankruptcy?

• Yes, some lenders specialize in providing VA loans during Chapter 13 bankruptcy.
• These lenders know the specific requirements and can help you through the process.

 Is There a Waiting Period After Chapter 13 Bankruptcy Discharge to Qualify For a VA Loan?

• After a Chapter 13 bankruptcy discharge, there is no required waiting period to qualify for a VA loan.
• However, the loan must be manually underwritten if bankruptcy occurs within the last two years.

If you have any questions about VA Loan During Chapter 13 Bankruptcy, please contact us at 800-900-8569. Text us for a faster response. Or email us at alex@gustancho.com . The team at Gustan Cho Associates is available 7 days a week, on evenings, weekends, and holidays.

This blog about VA Loan During Chapter 13 Bankruptcy: What You Need to Know was updated on September 11, 2025.