You present a fairly common problem in the modern world of real estate financing in our current economic condition. In the past, it was not a big deal for a divorcing spouse who relinquished his share of a property to remain on the mortgage debt, since the property would only go up in value and his interests were a little more protected. Today, many properties have dramatically declined in value, leaving the owners "upside down" in the house. Unfortunately for you, although you have no ownership interest in the house since quit claiming it to your ex, you are still obligated on the mortgage (deed of trust).

I am guessing that even had she wanted to do it, your ex-wife could not refinance the house, since it had no real equity following the big value declines we have seen in Nevada. I have pursued litigation against former spouses who failed to refi and remove the no-longer-responsible co-borrower from the debt, but the court cannot force the bank to allow a borrower off the hook. The fact is, you probably will suffer the same consequences your ex-wife suffers after the short sale, which could include a deficiency judgment, issuance of a 1099C that results in a tax debt, and/or damage to your personal credit rating.

The severity of the result may depend on the skills of her Realtor, the willingness of the bank to absorb the loss, and her (and your) viability as targets for the bank to pursue. Very much will depend on how good a job the agent does drafting a convincing "hardship package" to the bankers to convince them to allow the short sale to go forward.

There are ways you can challenge entries to your credit history and minimize their effects after a situation like this. The facts of why the short sale became necessary, along with a clear explanation of how you were not the responsible party, may go far in allowing you to salvage your credit rating.