“bank approved short sale, but were hit with a deficiency judgment”
Most States allow this. The bank can still claim you owe them the short sale difference. If you had a $100 mortgage but sold for $75, you owe the bank $25.
Also the bank can issue an IRS form 1099 if they write off that $25, claiming you basically were given $25 and must pay income tax on it.
The IRS was forgiving 1099’s from banks last year.