I've recently heard that if a home owner sells their home in a short sale they will be sent a 1099 tax document by the Federal goverment. The home owners are selling the home for less than what is owed and the goverment considers the loss "income". If you owe $140,000 and short sell for $100,000 you will be sent a 1099 for the income of $40,000. If the home is foreclosed on the same thing will happen, only difference is the seller is working to sell, they just walk away. Under both situations your credit is ruined. How does one know what the best choice is? What is your view?