Do I qualify for the Debt Forgiveness Act if my tenant in common is removed from the title?

I bought a house with friend as tenants in common 3 years ago. We both lived in the house for 1 year, then I tranferred (military) while he continued to live in the home for another year. After 1 year he stated he was filing for bankruptcy. I had him quitclaim the property to me, then tried to re-finance but was denied. My house is currently going through a short sale. Question: Do I qualify for the new Debt forgiveness act that passed? Technically, we (the owners) lived in the property for 2 years before I took him off title. He is still on the loan.

Nothing has been clarified.

First, is the loan a recourse loan? If it's non-recourse, non-issue.

Tell me again how you met the 2 of the last 5 years test? Did you move back in after he filed for bankruptcy? And now with the quitclaim, you own all of the property but don't pass the 100% ownership test. You could get the exclusion for your half....

You must be able to meet the 2 year test.
You must show that your financial situation forced the shortsale and/or the decline in property value did it.
The loan must be less than $1M, for buying the property, not cashing out to buy a car, etc.

If you are eligible, you would elect to subtract the shortfall from the basis and show shortsale on schedule D. The election will be made on form 982--which hasn't yet been revised to support this option.