It looks to me as a noob (not even that, really, more like a fetus) that shorting some of these homebuilders and monoline insurers has reached a point of diminishing returns, beyond which only outright bankruptcy will drive them materially lower. It seems to this schlump that this would become a zero-sum game, i.e., if you put trades on that worked so well that you bankrupt your counterparty, you will not collect on those trades. I have obviously never been in this situation. So my question is: If you are short a company that suddenly declares BK, does there still exist an exit to that trade? Or, more succinctly, if I believe a company is going BK, how best to profit from that?