You should talk with your CPA regarding the tax consequences. In order for a short sale to proceed you need the approval of all parties, including the home equity loan lender. Depending upon your qualifications for a short sale, meaning proving hardship, they are going to want to know what happened to the cash and how you plan on repaying them.
This is a common problem with people that get in over their heads and is best answered by your CPA because it is likely that if the HELOC lender DOES agree to a short sale, they will issue you a promissory note for the balance or issue you a 1099 for the foregiveness, both may have serious tax consequences.
We have a very good and experienced Realtor that does short sales in Dallas and I would be happy to refer you so you can find out all of your options.