Death forces sale

There was a death in the family and the surviving live-in girlfriend has to sell the 6-month old house. The house is now worth 40,000 less that what was owed.
Does it make more sense to try to do a short sale or offer a deed in lieu of foreclosure.
The deceased did not have any money, just small amounts of debt, the issue is that there may be a lawsuit and I am not sure how the lender will react. Do you think the lender will be willing to cooperate or not be cooperative because of the lawsuit - which might take years to resolve. His parents are the inheritors of his estate so I am trying to give them some advice that makes sense.
Thanks for any help!

Live-in girlfriend may have no legal rights to sell the house. The only advice that makes sense for this situation is to have the heirs consult an attorney.

You mentioned that the house is worth $40k less than is owed. There is nothing to sue over. I would let the mortgage company have the house.

Thank you Dave T., I will talk to them tonight.
Bluemoon, I was not clear. The estate is going to sue someone for wrongful death, so at some point, maybe years from now, the estate will have money, but right now there is no money. I was unsure as to how the lender would react if a short sale was requested would they be in agreement and agree to not try to get a deficiency judgement.
I was concerned about a deficiency judgement (state of TX) against the estate.

Agree with Dave, and of course you should talk to your live-in girlfriend and to her parents too so everything will go smooth. Good luck.

You never mentioned how much the house is worth, and what is owed on it.

The girlfriend is out of the picture and might have to be evicted.

The estate is not suing, the family/heirs are suing. This has nothing to do with the current mortgage.

Depending on the numbers, the family might want to short sale, and not have the mortgage company come back on the estate for the loss. Of course the heirs will get nothing out of it.

Processing the SS will be somewhat easier on the income and reason to SS factors.