If you can do a short sale, try that first, and do it immediately if you have received your notice of default. This is the "lesser of two evils" than a foreclosure, bankruptcy or deed in lieu of foreclosure.
And yes, there are hundreds of thousands of people facing this dilemma, so you are not alone. To qualify for a short sale, you have to be facing one or more of these hardship reasons that a lender will accept:
_ Reduced income
_ Medical bills
_ Too much debt
_ Death of spouse
_ Mortgage payment increases
_ Business failure
_ Job relocation
_ Damage to property
_ Military service
If you haven't already done so, engage a realtor who is experienced in short sales to list your property. When I say experienced, make sure it's someone who has already successfully represented sellers in a short sale for the reason that this is a time-consuming, energy-zapping, frustration-laden listing that will take a long time to process.
Here's an article on how to do a short sale; There are other articles related to this that you will see....but start with this http://homebuying.about.com/od/4closureshortsales/a/shortsal
And get yourself a good realtor! There is hope, but keep the faith!