SYMPTOMS
Error message "Hdd file is missing, corrupted, or used by other application" appears upon virtual machine startup.
RESOLUTION
NOTE: it is recommended to make backup of Virtual Machine by cloning it or simply copying Virtual Machine folder to safe place (when Parallels Desktop is stopped) in case of incorrectly performed actions can lead to data loss.1. Go to Macintosh HD -> Users -> "Your user name” (The “house" icon) ->Documents (Library) -> Parallels) and open the “Virtual Machine Name” folder.
2. Right-click (CTRL+click for “Mac” mouse or SHIFT+CTRL+click for “Mac” mouse) on the .hdd file and select "Show Package Contents".

You will see .xml and .hds files.

3. Copy the latest and the biggest .hds file and paste it in your Virtual Machine folder.

4. Go to that folder and right-click the .hds file and select "Get Info".

5. In the field “Name & Extension”, delete the name and enter "windows.hdd". Close this window. You will get a confirmation message. Click "Use .hdd".
Open the virtual machine configuration (do not start windows) from Macintosh HD -> Applications -> Parallels -> Parallels Desktop icon. In case your Windows starts automatically, press and hold “Apple” key and simultaneously click on Parallels Desktop icon again.
6. Choose "Edit" from the Parallels Desktop menu and select "Virtual Machine..." 
7. Click Hard Disk 1 -and then click the
Browse button.

8. Navigate to Macintosh HD -> Users -> [your user name]("house" icon) -> Documents (Library) -> Parallels and open the folder with the name of your Virtual Machine (VM). Select the “windows.hdd” and click the “Open” button.

9. You should get a message about your drive being converted. Continue with the conversion.
10. When it is finished, click “OK”.
11. Start your VM clicking the
Start button.