Given the information you have provided I wouyld think a short sale is in your best interest. A deed in lieu want be able to be completed because of the heloc. Also even if you could do a deed in lieu, the heloc could file a judgement and go after a deficency. If you do a short sale you are in the drivers sit to try to limit the deficency either by value or negotiation with second.
First Weber Group
Certified Distressed Property Expert