It will be difficult to have a deed in lieu approved if you have surplus funds in an amount enough to buy a 2nd home. The bank is going to want more skin in the game for you to be release from your obligation. So, don't expect them to roll over...Banks don't approve DILs when there are junior liens that exist, but since you have a junior with the same lender that could be worked out - just not a guarantee they will approve. You may want to think about paying off the junior lien to have a better chance of getting the primary mortgage approved for a DIL...but they will not allow a DIL while paying off the 2nd on terms...must be removed completely or some other terms worked out.
Most times when you are approved for a DIL you are forgiven of the remaining deficiency amount but you will be 1099d...it is a gov't requirement. Now, you should speak to your cpa about IRS form 982 which needs to be filed to get a waiver for the taxes due on the forgiven amount...your cpa will evaluate your specific case and be able to determine if you qualify for the tax waiver.
You should speak with a foreclosure or bankruptcy attorney about the wage or pension garnish concerns...I hope things work out for you. Tom Hinz www.shortsaletosell.com