With all things considered, I think they can apply in two years if the rest of their credit is intact. I'm working with a couple just now and that is the standard they were given by their lender. They are getting ready to buy in September.
It is a waiting period of 4 years. I was a Lender for 27 years, so I have the VA Guidelines. If it is medical and you can prove it, then it is only a waiting period of 4 years. Call if you have anymore questions. There are particular items you want to keep so you can pre-qual easily.
I believe you will have to wait the full 7 year period however this is a great question for a lender. I recommend calling Shayla Gifford at Guild Mortgage 775-200-0155. She is a knowledge powerhouse and will definitely be able to give you the answers you need.