Assuming the BK court allows the short sale, the pragmatic lender will issue a 1099C in lieu of seeking a deficiency judgment, Should the lender get the BK court's approval to obtain a deficiency judgment, the judgment will be added to the debtor's repayment plan and not discharged.

This works the same for all credit activity, in that the BK card will get hit harder on the numbers which is tough since they are lower to start with.If the BK was discharged 09/05 it will be a long time before it gets high but that is a good thing because it is that way so that the person takes it slower and gets a chance to learn to manage their finances unless of course they just had some misfortune of getting hit with an illness and a bunch of medical bills took them down.

The most common situations when cancellation of debt income is not taxable involve: * Bankruptcy: Debts discharged through bankruptcy are not considered taxable income

It was a pain to get the Payoff Statement and Lien Discharge since the Note was held by this "little old lady" (in her 80's I think) who had no access to electronic communication or a fax. 

I didn't even see the houses until I was fully discharged with honer and found my self moving in. :) How did you finance this deal?

Qualified Principal Residence Debt Taxpayers may exclude income from cancellation of qualified principal residence indebtedness for discharges of debt occurring after 2006 and before 2015.

So, if you are in or ind yourself in financial trouble in the future, having a free and clear personal residence will allow you to exclude this amount from any creditor action, and even keep the value of the equity while other debts are discharged through BK (in some states).  

It will actually be somewhat less since there will be legal & discharge fees for the original loans and legal & costs for the new loan.

Not to bug you before that 2 - After they send the paperwork to you submit it to the Lender and tell them Either they stop the sale NOW or your client will File BK and they will have to wait for your client to discharge in 8-12 months to start Foreclosure over. 3 - Call a contractor and ask if he knows anyone going into foreclosure.

See Publication 4235, Collection Advisory Group Addresses, for address information.Taxpayers or their representatives may apply for a certificate of discharge of a tax lien if they are giving up ownership of the property, such as selling the property, at an amount less than the mortgage lien if the mortgage lien is senior to the tax lien.