Security Deposit is Likely Spent?

We are renting a duplex and have made all rent payments on time. We are in a month to month lease. The property is now in short sale, and I have reason to believe the landlord has spent our security deposit. I believe it is the law that the deposit has to be held in a non-interest bearing account. We plan on moving out in a couple months and require a 30 day notice. What are our rights? I do not know if it is best to not pay the last months rent, or if we should and hope she will have the money to pay our deposit. Also, do I have any ground to ask her to prove that she has kept our deposit and has the cash on hand to pay it back to us?