My mortgage company could not give me any answers.
I don't have to do the short sale but I don't want to leave my house to look like the other foreclosures in the area getting vandalized. They are also paying some relocation monies.
Chapter 13 Bankruptcy Attorney
I understand your question to mean will the mortgage company be able to charge back/write off the debt so that it is counted as my income according to IRS regulations. You state that you got a discharge without reaffirming the house. Do you mean that you did not reaffirm the debt on the house? If you received a discharge and did not reaffirm the debt on the house and you listed the debt, then the debt was properly discharged. This means that it cannot be attributed to you as income by the mortgage company or the IRS. You should be careful in what you sign as part of the short sale agreement, as you do not want to be giving away your rights or agreeing to new liability.
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Chapter 7 Bankruptcy Attorney
Since the debt was discharged, you should not have any tax consequence as a result of a short sale because the creditor isn't forgiving the debt, it was discharged in bankruptcy.
Sometimes creditors do send out 1099 forms anyway after a short sale, but your tax adviser should be able to help you to resolve that issue.
Hope this perspective helps!
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I agree that you do not have any personal liability for the house once it is discharged in bankruptcy. There should be language in the short sale documents that it is in "full satisfaction" or "without recourse" as far as any deficiency is concerned. If you do happen to receive a 1099, it should have the box indicated it was included in a bankruptcy checked and you should have no issue. If not, you may need to make a notation on your taxes next year just to be certain everything is smooth with the IRS, because even an error can cause a delay in your tax refund.