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As many Americans rush to file their 2011 taxes to meet the April 17^th deadline, some may wonder whether they have to pay tax on forgiven mortgage debt. Many individuals who have had mortgage debt forgiven after successfully negotiating with a mortgage company may find they owe tax on the forgiven debt, though there are exceptions to the rule.

Income Tax on Forgiven Debt

The IRS requires individuals to pay income tax on forgiven mortgage debt. Historically, this includes any loan modifications that reduced the total amount owed on a mortgage and mortgage debt forgiven in the event of a foreclosure.

The IRS provides this simplified example on its website: If a homeowner had a loan of $10,000, paid back $2,000, then defaulted on the loan, there was a cancelation of debt of $8,000 and that $8,000 is taxable income. Any amount of canceled debt over $600 must be reported to the IRS, even if it qualifies for some of the following exclusions.

The costs of higher education continue to increase faster than the overall rate of inflation. Parents are struggling to pay tuition costs for their children. Although funding college was never easy, the ballooning increase in tuition and fees forces many parents to take out loans they may not be able to repay.

These excessive loans can worsen your financial situation and drive you to consider filing for bankruptcy protection.

In the past, families would often fund college expenses through a second mortgage. But as home prices have plunged borrowers no longer have adequate equity for a second mortgage.

Many parents are turning to other forms of funding. One popular choice is the Parent Loans for Undergraduate Students (PLUS) loan. This loan is government issued and requires no collateral. But a PLUS loan comes with a 7.9 percent fixed interest rate.

In December 2009, the Florida Supreme Court ordered that lenders and borrowers be allowed to file for pre-suit mediation prior to initiating the foreclosure process. This pre-suit mediation program, dubbed Residential Mortgage Foreclosure Mediation, fulfills Florida's mediation requirement for all foreclosure matters and allows lenders and borrowers to voluntarily attempt to obtain a resolution. The goal of the program is to help homeowners keep their homes and give them a fresh start financially.

The program was initially available only in state courts. However, in recent months the Federal Bankruptcy Court enlisted bankruptcy trustee Laurie Weatherford's help in creating a similar program to help homeowners in the federal bankruptcy courts. Bankruptcy judges had grown concerned with the number of debtors who were entering their court rooms owing more on their mortgages then their properties were worth, and seriously behind on their mortgage payments.

The federal program works in conjunction with Chapter 13 bankruptcy proceedings. Chapter 13 proceedings can often allow homeowners to keep their homes by working out a debt repayment plan with their creditors.

The length of time between initial filing and completion of a Florida foreclosure continues to grow. On average, the process now takes 749 days, or a little over two years. By comparison, the national average is 366 days. Only two states have longer completion periods than Florida - New York takes the number one spot at 986 days with New Jersey coming in a close second at 974 days.

The long processing period is largely due to the fact that Florida foreclosure laws, unlike those in most states, require judicial approval of foreclosures. Combine that with the fact that Florida is home to a disproportionately large share of the country's foreclosures, and you have a perfect recipe for big backlogs and long waits.

The duration of a Florida foreclosure proceeding is not expected to shorten any time soon, as initial filings continue to grow. October's initial filings were seven percent higher than the same time last year. October also marked the third straight month of increases in foreclosure filings after a temporary slowdown caused after regulators discovered that mortgage companies and loan processers had behaved improperly.