Year to date 2014 has produced about 200,000 short sales, which is a drastic reduction year over year. The tax code provision allowing for non-taxation of cancellation of debt has not been renewed. There may still be something enacted, but in my estimation it wouldn’t be before mid-term elections. In any event it would have to be made retroactive to cover the 2014 tax year. If you live in a judicial foreclosure state like Florida, which has deficiency judgments, you can negotiate any cancellation of debt amount, whereas in a foreclosure you cannot. Additional expenses get added on to your cancellation of debt amount that gets reported to the IRS, including attorney’s fees, repairs, etc. If you are eligible for a short sale (just because you have a property you owe more against than its market value does not make you eligible for a short sale) you definitely want to talk to professionals for the legal and tax consequences of a foreclosure. If you are not eligible for a short sale, please consult an attorney to help you understand your options. One might be bankruptcy, but if you have other assets, your lender will most likely have a requirement that you use them to settle your debt. If you have a short sale situation many investors will probably approach you and if you do not have a real estate professional who understands short sales, you could end up in trouble by signing on to a sales contract. Just make sure you take any documents to an attorney for review. Lots of homeowners trying to do short sales now are running into roadblocks with their lenders. There is a bit of lender chaos now. Work with someone who can actually be helpful to you.