Kenneth,
You may fall under the debt relief act that took effect recently. Here is the link to that act, along with the form you will need to file if you in fact receive a 1099 for the deficency. Please read the information and follow it up by consulting an accountant.

Here is a link to an article from the IRS outlining the act.
http://www.irs.gov/irs/article/0,,id=179073,00.html

This next link is common questions about the act.
http://www.irs.gov/individuals/article/0,,id=179414,00.html

This last link is the IRS form you would need to fill out to receive the debt relief.
http://www.irs.gov/pub/irs-pdf/f982.pdf

You are going to have to talk to a CPA and/or an attorney.

If you were a owner occupier you might fall under Bush's new plan. See this link:
http://www.whitehouse.gov/news/releases/2007/12/20071220-3.html

Whatever deficiencies you have you will have to have documented proof such as receipts, the HUD, corresponding paperwork, etc...

I'd speak to an attorney and/or CPA to ensure you making the best financial choices in regards to this already difficult situation.

Good luck,
Susan Walker