It looks like nobody wanted to step up to your question, so I will attempt. In MOST cases I would say after. Often times when a homeowner decides to short sale, and is no longer making payments on their home because of their hardship, this may allow them to get caught up on other bills and not have to file at all. I would reccommend BK after short sale since there may be a promissory note or a defieciency judgement that could be wiped out in a BK.
One exception to this, is a looming foreclosure and there is not enough time to get the short sale started and the sale date postponed...then filing a BK WILL delay the sale date and stop the foreclosure during the process.
This is a perfect time to reach out to Mr Credit and ask all of your questions. I know his qualifications from being in this Industry and his excellent reputation. If you are going to short sale there would be no capital gains taxes, because there is no profit/no gain. If you are wondering about the tax, on the write off the banks takes, the Debt Forgivesness Act goes through Dec 31, 2012 (only a little more than 6 more months). Those Homeowners thinking about a short sale, may want to gather the knowledge and tax/legal advice and get started. We don't know if this bill will be extended. In most cases, as long as there is insolvency, there is no tax consequence in CA.
Good Luck Barb! If you have more questions let me know.
Windermere Real Estate