If you file bankruptcy before
the property is actually foreclosed, then the discharge in bankruptcy also discharges the associated tax obligation. Also, until Jan 1, 2013, IRC 108(a)(1)(E) protects homeowners from being taxed on a discharged debt secured by the taxpayer's principal residence.
Re the debt itself, the bankruptcy prevents the lender from attempting to try to collect any unpaid deficiency balance on the loan.
Re the credit cards, the discharge in bankruptcy also discharges the tax liability associated with the forgiveness of debt.
In short, based on your stated facts, Chapter 7 appears to be a very good plan for you.
Hope this helps. NOTICE
: My goal here is to educate the public about the law. Please help me in this effort by clicking Accept (or, click on one of the happy smiley faces/stars/etc., if applicable) for my Answer to your Question. If you have a subscription account, clicking Accept does not create any additional charge. It merely gets me credit for my Answer.
And, if you need to contact me again, please put my user id at the beginning of your question ("To Socrateaser"), and the system will send me an alert. Thanks!
Please Click the following link for IMPORTANT LEGAL INFORMATION