This is a legal question, so for a definitive answer you'll need to speak to an attorney. My understanding is that once a house is included in BK, all negotiations for a short sale stop. I went through this a couple of years ago and had to resubmit my short sale package. After that we went through months of confusion as I was told the home was in the short sale department, and was in the BK department and no progress was made. In my situation, my seller eventually got out of his BK and we were able to proceed to closing.