This is the time you need the advice of several professionals. First would be your attorney. Find a good one and listen to all their suggestions. The second one is your current mortgage holder. They have a number of programs that are available to modify your current mortgage. Don't be afraid to contact them as soon as possible. They may have a few things you can do to push back the possible foreclosure and give you some breathing room. The third would be to contact a local real estate professional. They will be able to assist you in working out the details if it is necessary to sell. At this point I do not know your particular situation and weather or not a 'short sale' is appropriate. It depends on the balance of your mortgage and the price your home is expected to sell for. It may simply be the situation where you can work out the mortgage with your bank to give you some extra time and to properly market your home for sale.
The bottom line is this. Your best option is to sell your home normally. Second best is arranging a short sale where your credit will probably take a hit for some late payments. You ultimately want to avoid forecolosure.
I hope this helps a bit. Be sure to work through your other options with the bank and attorney.
Ken Mundorf, Realtor