Thank you for that additional information.
Unfortunately, yes, this would be considered as "forgiveness of debt" income, which you'd typically need to pay income taxes on. Now if that debt is discharged in bankruptcy, then you would not owe taxes on it.
The Mortgage Forgiveness Debt Relief Act of 2007 generally allows taxpayers to exclude income from the discharge of debt on their principal residence. Debt reduced through mortgage restructuring, as well as mortgage debt forgiven in connection with a foreclosure, qualify for this relief. But note that it has to be a purchase money mortgage on a primary residence, and it doesn't seem like yours would count.
Again, bankruptcy could be an option to discharge the debt without income tax implications. But it has bankruptcy implications. That is, it stays on your credit for 10 years (as opposed to 7 for a short sale). It's generally more complicated, and you're going to have to pay court fees, attorney fees, etc... to file that. I'm not saying that you shouldn't, but it's something that you should consider that it's not a simple solution.
Hope that clears things up a bit. If you have any other questions, please let me know. If not, and you have not yet, please rate my answer AND press the "submit" button, if applicable. Please note that I don't get any credit for the time and effort that I spent on this answer unless and until you rate it positively (3 or more stars). Thank you, ***** ***** luck to you!