This is more of a question as to which would be more of a burden. In a short sale or Deed in Lieu of foreclosure when the property is a second home or investment property it is usually customary to have a 1099 issued for the difference in sale price to outstanding loan amount. This would be considered taxable income and therefore unavoidable, even if you declared bankruptcy. 

On the other hand a defficiency judgement can be dismissed through bankruptcy and the mortgage company cannot strong arm as much as Uncle Sam. I read alot of posts re: the avenues to take but rarely is there anything mentioned about the issuance of a 1099 for a second home or investment property .

Does anyone have feedback on their experience with clients getting 1099's for short sales or deeds in Lieu of foreclosure.