In doing a sort sale, even the possibility of owing taxes on the 1099 is far greater than owing the full balance. when a property is foreclosed on the bank has the right to come after the previous owner for the full deficiency, but at this point it will become a judgement and they could be able to garnish wages.
Each short sale is a unique situation . I recommed teaming up with an experienced Realtor, tax accountant, attorney and the lender(s) involved, to help you determine your best plan.
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The DEFICIT on the Loan,
The Income Tax on the Paper gain,
The Property Taxes in arrears.
Florida, being a RECOURSE State; the Lender may be able to come after you, for years to come: You'd have to research Florida law to see what the statute of limitation is on this.
According to the Debt Relief Act of 2009; you would not owe Federal Income Tax: This would depend if this expires next week, and is not renewed. More research needed.
If you haven't been paying your Mortgage; then you probably haven't been paying your Property Taxes either; and that is not transferred to to next owner, (Bank) .
IDEA!!! Can you do a Deed-in-Lieu and consumate it next week? More research!
Good luck and may God bless
However, since congress has not yet acted on extending the Mortgage Debt Relief Act if your SS has not closed by 12/31/12, you may be out of luck. Let's wait and see.
I hope this is the information you are seeking.