Bankruptcy Law Questions? Ask a Bankruptcy Lawyer.
Yes, it is possible.
A trustee in a Chapter 7 bankruptcy case can liquidate real estate secured by a reverse mortgage if there is available equity above and beyond what a debtor can protect as exempt.
The trustee may have to pay the holder of the reverse mortgage a pre-payment penalty if one is provided for in the mortgage documents. In the case of real estate with significant equity, the pre-payment penalty will not deter a trustee from liquidating the property.
In conclusion, consider real estate property secured by a reverse mortgage to be an asset, subject to liquidation in a Chapter 7 bankruptcy case, just like any other case involving real estate.