California Code of Regulations
Title 12 - Military and Veterans Affairs
Division 2 - Department of Veterans Affairs
Chapter 2 - Veterans' Farm and Home Purchases
Subchapter 1 - Eligibility and Qualifications
Section 309.4 - Consideration of Bankruptcies

(a) An applicant who has previously been adjudged bankrupt and whose debts have been discharged in bankruptcy under Chapters 7 or 13 of the Bankruptcy Act (Title 11, U.S.C.A., Sections 701 -- 766 or Sections 1301 -- 1330) shall not be refused a loan for this reason. If the applicant has sufficient income and assets and has re-established credit, the Department shall grant the applicant a loan. "Sufficient income and assets" is defined as income and assets such that the balance available for family support is equal to or greater than forty percent (40%) of adjusted gross income as defined in Section 309.1 above.

(b) An applicant, who has been adjudged bankrupt under Chapter 7 of the Bankruptcy Act, shall be considered as having re-established satisfactory credit when the applicant's latest credit report shows at least one creditor that is being paid as agreed over a period of at least six months. If there is more than one creditor showing on the credit report, then all creditors shall show paid as agreed over a period of at least six months.

(c) An applicant, who has been adjudged bankrupt under Chapter 13 of the Bankruptcy Act, shall be considered as having re-established satisfactory credit when the applicant has satisfactorily completed all payments under the Chapter 13 plan. However, when the applicant has not yet completed the plan, then the Department shall inquire of the Trustee as to whether the payments to the Trustee have been made in the manner prescribed by the Bankruptcy Court in order to establish the applicant's creditworthiness. In the case of a Chapter 13 filing, written approval from the Trustee shall be received by the Department before a loan may be granted, which is in accord with Title 11, U.S.C.A., Section 364(a) and (b).