I highly recommend talking with an attorney as well as your CPA for a matter like this. I work closely with a BK attorney for shortsale clients. The initial consultation is free with no obligation. He will give you a better perspective of your options. He will inform you so you can make a wise decision. I work with an attorney for matters like this so my clients get the best possible advice. Contact me, and I will forward the attorney's contact information.
File BK, you can live without a good credit score; Credit Card / debit card is easily obtained. In as little as 3 years you could apply for a new mortgage. Note, the Bk should stop the second from any deficiency recourse it might try later down the road.
This is my opinion only seek out a professional BK attorney and a cpa.
Please call me at 805-630-3323 so I can get started and help you make a decision.
Otherwise, with your current credit score, I don't see any material difference between a short sale or BK for you. You can verify with a credit counselor on that. Here's my take. With a short sale, you may be able to recover and be able to qualify for a mortgage in 5 years. With a BK, you're out of luck for at least 7 years. So, with your current life plans, both would be poor options.
Realistically, your best bet is to continue to stay current on your payments and hope the current housing rebound lifts you out of trouble in another year or so.