Many sellers in the position to consider a short sale have other financial issues, including substantial debts, and filing for bankruptcy might seem like the right move. However, while filing for bankruptcy can help with many of these outstanding debts, it will hurt your ability to complete a short sale. Put simply: When you file for bankruptcy, banks and creditors are no longer allowed to collect from you. Because a short sale is technically a form of collection, it clashes with those bankruptcy rules. Talk to an expert to see what you can do to avoid ever declaring bankruptcy.