Recently, a bankruptcy court for the district of Puerto Rico held that a debtor’s waiver of the automatic stay contained in a pre-petition forbearance agreement was enforceable. In re Triple A & R Capital Inv., Inc., 519 B.R. 581 (Bankr. D.P.R. 2014). Unfortunately, the case adds little to the debate over the enforceability of pre-petition agreements impacting bankruptcy rights for one simple reason — the court’s holding was premised on the fact that the pre-petition forbearance agreement waiving the automatic stay was enforceable because the debtor, as part of a post-petition stipulation permitting the use of cash collateral, had ratified and agreed to be bound by the forbearance agreement.
Nonetheless, the court did briefly look at the treatment of pre-petition waivers of the automatic stay lacking post-petition ratification. Its examination provides a good opportunity to review the state of the law on this issue.
Before deciding the issue on its ratification grounds, the court noted that bankruptcy courts that have examined the enforceability of pre-petition waivers of the automatic stay:
[H]ave used different approaches with conflicting results. Three basic approaches have emerged: (1) uphold the stay waiver in broad unqualified terms on the basis of freedom of contract; (2) reject the stay waiver as unenforceable per se as against public policy; and (3) treat the waiver as a factor in deciding whether “cause” exists to lift the stay.
Id. at 584. The court further noted that “[a] review of the cases nationwide that addressed this issue indicate a …