Have you asked your current agent these questions? Hopefully he or she has the skills and experience to advise you on your options. That being said, I can appreciate your wanting to become fully informed and so you're taking a great first step by reaching out here on Trulia.
I'd avoid foreclosure at all costs, and talking to an attorney is always recommended. Renting the property is a good option if that will keep you afloat. Generally speaking, I would absolutely do a short sale before going to foreclosure, which is much kinder on your credit and a more responsible way out. Plus it shouldn't cost you anything - BEWARE of any company that wants to charge you a fee or asks you to sign paperwork transferring interest in the property under the guise that they will be 'buying' your home or anything similar.
No two situations are alike so I would seek out a Realtor experienced in short sales and very active in our current market, an attorney and a tax accountant to explore your options. Send me your e-mail or call me at 727-366-0324 and we'll send you our e-book that details every aspect of the short sale and foreclosure process along which is a great first step in exploring your options. I'll also put you in touch with our real estate attorney who usually waives his fee for our clients for a consultation.
You can also visit us here for further information
Know that you're not alone. About 40% of the properties on the market in Tampa Bay are short sales or foreclosures.
Again, feel free to give a call at 727-366-0324 just to chat.
Julia & Matt Fishel
Suncoast Partners @ Keller Williams Realty