I think you should talk to another attorney or two, and consult a couple of tax professionals. There could be tax liabilities if you short sale the home, depending on if your mortgage is the original one used to buy the house, and if you have a 2nd or line of credit. Also, you might have too much income and assets to qualify for a chapter 7.

If you sell the home in a short sale, it could be a long time, i.e., a few years, before you can qualify to buy another home. On the other hand, if you don't sell, it will be many, many, years before the value of your home doubles.

If you do sell, you could rebuild your credit and save for a down payment and buy something at current market value. If you keep your home, you are paying much more than market value for it, but your payments may be the same as rent.

Another thing to consider is asking your lender for a loan modification. It is quite possible they can lower your payments significantly, and I recently saw a lender actually reduce the principal owed on the mortgage. If you want to do this, you need to do it before filing BK. It has been my experience that they will not modify a loan if you are in bankruptcy. This is something you can do yourself. You should not pay anyone for a loan modification.

I can't tell you what the right course of action is, you have to seek advice and make that decision yourself. But I do think you should make a decision on what you will do with the home first, and then file bankruptcy after if that is what you need to do.