Can my credit take a double hit, from the Bankruptcy then again from either the deed in lieu or foreclosure?

Have been dealing with CitiMortgage for 7 months now on a Short Sale. Chapter 7 Bankruptcy in 2008, never reaffirmed my mortgage. Was told by Citi yesterday that I no longer qualified for HAFA as it ended 12/31/12, but I had applied 7 months ago. Today I was told that my buyer is backing out of the contract. He has patiently waited for Citi's answer for 7 months. I can do a Deed in Lieu. My mortgage is Discharged Chapter 7 Bankruptcy and I've worked hard to build up my credit. I don't want this to negatively affect me. My options now are to let the bank foreclose or do a deed in lieu. Can my credit take a double hit, from the Bankruptcy then again from either the deed in lieu or foreclosure? I have even gotten my Congressman involved to try to move Citi along to no avail. I can't start litigation against them as I don't have the necessary capital. It's sad that this bank can treat people like this and get away with it.