Hi - I am considering entering into a short sale of my townhouse, but I was wondering if anyone can advise me on if whether or not the Mortgage Forgiveness Debt Relief Act 2007, applies to the difference between what I purchased the townhouse for in 2006 and what it will ultimately sell for (much lower) in 2008? Thank you in advance!

Primary residence, first time buyer, purchased condo at $298K in August 2006. Had 80/20 option ARM, both lenders finally agreed to short sale. Property will be sold by end of this month for $145K. How do I make sure that I don’t end up paying taxes for the difference? Am I covered under the Debt Relief Act?