So sorry you are in this situation. It is all too common in Southeast Michigan right now.
There are many articles on our blog about short sales and foreclosure. I have linked to the short sale articles for you below. You can do a search in the sidebar for foreclosure articles if you wish.
You might also want to get in touch with HopeNow http://www.HopeNow.com
As for what happens, if you sell short, then the second mortgage will have to negotiate for what it will accept in a short sale. It will be a few thousand dollars, typically. If you foreclose, then they will get nothing if your home is less than what you owe the first. Your credit card debt is unsecured.
I would be happy to talk to you. Our team has helped many sellers like you with short sales and we are just down Woodward from you in Birmingham.