I'm sorry to hear about your situation losing money every month. The best person to speak with for legal advice is a real estate or bankruptcy attorney. However, here has been the advice attorneys have given to clients of mine. The impact to your credit is less with a short sale than with a foreclosure. If the situation is regarding your primary residence and you only have one mortgage on the home, the attorneys have recommended foreclosure as the best option financially for your family (lender gets the home instead of you paying your mortgage back). In this scenario, there is no cancellation of debt for you to have to claim on your taxes according to the attorneys I have spoken with.
However, if you have a second mortgage on the home or if the home is a rental property as is in your case, the attorneys have recommended a short sale as the better option as your Real Estate Broker can help you negotiate with the lender to get some of the cancellation of debt reduced and the impact to your credit is less than with a foreclosure.
I hope this helps. This was legal advice given to clients of mine by attorneys. If you decide to go the route of a short sale on your home and you need a Real Estate Broker, I would be happy to assist you. The very first step would be for a Broker to conduct a comparative market analysis on your home to determine what the market value is. Once you know the market value, that information will help you decide the next steps with the home. Please do not hesitate to contact me with any questions you may have.
Real Estate Broker, Windermere Realty Group
(503) 522-5803 direct