You need to forget about your credit score right now. The BK just killed it. A short sale alone is NOT a big hit on credit, it's the missed payments that hurt the most, second to the BK.
Regarding the 1099c: If you're going to short sale an investment property (you never lived there or did not own & occupy this house for 2 out of the last 5yrs) you will get a 1099c that you will have to pay the IRS on,,based on the negative amount times your tax rate.
I suggest speaking to a CPA, even if this is an investment property you may be able to still file IRS form 987 & try to prove your insolvency (inability to pay).
If this is your Primary Residence & the bank issues you a 1099c, this is actually a GOOD thing, because the bank CANNOT issue the 1099c AND give you a deficiency judgment in the future. If this is your Primary Residence & you receive the 1099c, go to the CPA file form 987 on your 2011 tax returns & you DO qualify under the Mortgage Debt Forgiveness Act of 2007 & you do NOT have to pay any extra income tax to the IRS.
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Short Sale Department, LLC is not associated with the government, and our service is not approved by the government or your lender. Even if you accept this offer and use our service, your lender may not agree to change your loan. If you stop paying your mortgage, you could lose your home and damage your credit.
I don't know why the IRS would look at debt forgiveness from a short sale any differently than from a foreclosure. But you would want to ask your attorney or CPA to councel you on that.
For more information, see the IRS webpage at http://www.irs.gov/individuals/article/0,,id=179414,00.html.
You may also wish to consult with an attorney to ensure you're protected.