[Dianna]

They could see if the bank would accept a short sale, and put the home on the market, selling at current market value with the bank accepting that amount as the payoff. I've heard of banks doing this for people that are in trouble with their mortgages.

In some cases (perhaps all), I've heard that the IRS considers this money forgiven debt and makes you claim it as income so they can tax you on it.

[KoRn]

I have heard that too, I didn’t consider that. I’m glad you mentioned it. I think that’s wrong. Forgiven debt shouldn’t be considered as income under any circumstances. That’s crazy. Especially when you consider how all of these banks aren’t paying taxes on the bailouts.