I work both as a Managing Broker of a real estate company and as a Quasi Director of Short Sale Negotiations for a law firm. You should know that you are typically a long way off from having your home actually foreclosed on from the time you receive the initial foreclosure summons until the time it is actually sold at auction. I have seen many, many cases where several months, sometimes a year or more goes by before the house is actually auctioned off after the owner first receives notice of foreclosure.
2nd, I would tell you that doing a short sale is almost always a better option than a Deed In Lieu of Foreclosure or Cash for Keys if it's still going to show as a foreclosure on your credit report. Further, under a HAFA short sale you can walk away with $3000 in cash from the bank. If you have an FHA/Hud mortgage you have a good chance to walk away with $1000 in cash.
Please feel free to call me directly at 815-436-5511 and we can discuss it further.
Paris L. Smith