If the lender does not agree to waive any deficiency (the difference b/w the short sale price and what you owe) then they could file a suit against you and obtain a deficiency judgment. If they do so, they can then file the judgment as a lien on any property you own and seize any non-exempt assets (such as a wage garnishment
You may be able to get them to agree to waive any deficiency as part of the short sale process. If they do so, you will have to pay income taxes
on the amount waived unless you were/are insolvent at the time of the short sale (although you should speak to an accountant about this).
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