Credit Hit after Short Sale?

Can I short Sale my home if I have two mortgages?

Yes, but this will make the short sale more difficult.  It is hard enough to get one bank to agree to a deal, let alone two at the same time.  One of these banks will have to accept the short end of the deal.

During the process of foreclosure the bank is “demanding” that I make a monetary settlement to be paid at a future date.  Do I have to agree to this?

The bank is trying to cover their expenses and get as much money as they can.  The best way is to tell the bank that they will have to foreclose on the property, if they do not accept the short sale.

Can the bank seize any funds held in personal bank accounts through a Short Sale?

No

How will my credit score be affected by a Short Sale?

On your credit report the mortgage will not state that balance was “paid-in-full” but it will say that it was short saled.  Because of this you will have a lower credit score.  Short sales are not as severe as a foreclosure, however.