Should we seek for a deed in lieu, foreclosure or bankrupcy?

My husband and I carefully planned to purchase our home four and a half years ago. We had saved $20,000 for the down but what we didn't do was get a lot of education. We worked with professionals that we really thought we could trust. We knew we were buying at a bad time but my husband had just returned from Iraq and we were needing some stability for our little girls. So we found a home we sort of liked but could afford and went to the closing. We were told time and time again before the closing that we would have a specific payment and it was one that we could afford. When we got to the closing it was a completly different loan. They told us there was a mix up and that we'd be paying much much more but not to worry. They told us that the market was so hot that we shouldn't put the money down on the loan. We should keep the $20,000 and use that to make payments for just two months. Then our home would have gained equity and we could refi for a much better loan. So we fell to their pressure and trusted their advice and went through with the loan. Two months later the market crashed and our home lost value. Suddenly those professionals were no where to be found - new jobs, new companies, no one to help us. We blew threw the $20,00 on payments and my husband has been working every over time hour he possibly can for the past four years. We've sacrificed other bills to make our house payment and have destroyed our credit. A mold problem in the basement is out of control and we just don't have the money to fix it because it's all going to the house.
There is a rental property nearby that is totally affordable for us. We have an opporutnity to take it and rebuild what we once had. We just don't know how to exit this property. We are two payments behind and can't find a realator because of the mold. Every professional we talk to has a different opinion, wants different amounts of money and disagrees with what the other said. We are so confused. Bankrupcy seems the easiest thing but since our credit is already horrible (650) we don't want to ruin all hopes of ever getting into a home again. Any advice would be so welcome!