You should consult with a debt settlement attorney. This is what my firm does, and we litigate. The bottom line is that you will need to have some funds in order to settle the debts, which means either you will need to use your current income, or pull a bit of equity out of your homes in order to pay on the debts. You are not doomed, provided that you seek professional help immediately. Do not let a judgment get entered against you, that would be the worst case scenario.
You ask a lot of questions and, quite frankly, there is not enough information to determine answers. You need to sit down with a bankruptcy attorney to review your situation. Not sure why you have two houses, but if there is equity, you might be able to use one to alleviate your debt issues. Good luck.
This should not be considered legal advice, but rather simple information. You should consult a lawyer to review your unique situation. No client-lawyer relationship exists until you sign something indicating there is.