A short sale is the way to go.
You will have a credit impact for payments you don't make probably for a couple of years.
on the deed in leiu is the same as a foreclosure.
You will have major credit impact for 7 years.
Harold Sharpe - Broker
So Cal Homes Realty
California Department of Real Estate Broker License # 01312992
Deed in lieu and Short sale avoids foreclosure and attorney's involvement (state by state). Both shows the lender/servicer that borrower has intentions to avoid foreclosure. Credit-wise in my opinion a short sale is better.
Please email Paul at email@example.com he might have the best answer for you.
Have you tried a loan modification?