Seek Professional Counseling from an Attorney and Tax Advice before doing a Short Sale
The Mortgage Forgiveness Debt Relief Act of 2007 is an option created by the government to help assist sellers when they can no longer afford to pay their mortgage.
My suggestion is to educate yourself in this situation by going to the IRS web site and research foreclosure, short sales and debt forgiveness. Many factors determine if your debt can be cancelled by your lending institution... (there's a ton of paperwork and diligence providing the documentation required to accomplish the task). A 1099-C form is one term you will want to discuss with your tax advisor. It is my understanding that the Mortgage Debt Relief Act of 2007 allows the taxpayer to exclude income from the discharge of the debt on a principal residence. Investment properties would not qualify for this relief.
It's important to visit with your Attorney or CPA before beginning the process. The amount forgiven might be reportable as income. So, visiting with an experienced attorney about bankruptcy may provide you with the relief you really needed in the first place.
This article is not advise nor directions on how to do a short sale... but, may help consumers to research the concept of how a short sale and/or bankruptcy process works. After you have counseled with your attorney and tax advisor... and a short sale is in your best interest, please contact me on listing your home.