IRS and forclosure

One more question.
The mortgage company sent me paperwork for a short sale, in it was a page stating that if the short sale doesn't go into effect and the house forcloses, this information is sent to the IRS via a 1099. What does that mean? and why? :eek:

If any creditor forgives more that $10,000 in debt (I think that is the amount, it may be less, I don't recall the exact number), it is considered income by the IRS and you have to declare it on your taxes.

Thanks, that sucks!

Anybody know where I can find out more info about this!!!