An additional consequence of losing your house to either foreclosure or a short sale, is the potential tax liability. (As if you aren’t hurt enough!) The IRS has added a section to their website that helps explain it. You need to consult a tax professional to be sure, but this site gives you some information to start with.
** Update 12/20/2007 : HR 3648, the Mortgage Forgiveness Debt Relief Act of 2007 provides tax relief for homeowners who lose their homes during 2007, 2008, and 2009. Read Kelly Kilpatrick’s article for a good explanation of what it does.
