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As Congress struggles to pull the country back from that so-called fiscal cliff, homeowners who owe more on their mortgages than their house is worth are facing a cliff of their own.

“Now we're not certain whether they're going to extend it and I'm not sure how much attention is being paid to it, because we are dealing with the fiscal cliff situation,” said Jim Cardinal, Syracuse Securities Loan Officer.

Congress passed the Mortgage Debt Relief Act of 2007 during the early days of the housing crisis. It exempts homeowners from having to pay federal taxes on the balance of their mortgage after a foreclosure or short sale. It's going to expire on December 31st and could mean big trouble for a lot of people.

“Even if $100,000 of your mortgage was written off, now you have to pay taxes on that $100,000. It could push you into a different tax brackets, because it adds to your income. These people are trying to get out of being underwater and it's just pushing them deeper into the underwater situation because they now have this debt with the IRS as well,” CPA Alexis Meeks said.

The fear, if the act isn't renewed, is that it will cause more struggling homeowners to file for bankruptcy rather than work out an agreement with their lender and the worry then is it will continue to drag down a still anemic economy.

Meeks said, “If the act goes away and you're stuck underwater, financially, bankruptcy is going to be one of your only options unless you can claim that you're insolvent and therefore, some of that debt can be alleviated.”

Last month, attorney generals from 43 states sent a letter to Congress asking for the act to be extended.