A recent ruling of the Bankruptcy Court for the Central District of California endorsed a path toward enforceability of prospective waivers of the automatic stay in certain circumstances. In short, such a waiver approved in a bankruptcy case may be enforceable in a subsequent bankruptcy case. This offers creditors a tactical opportunity to significantly better their position in such a subsequent case.
For the past several years, creditors in the Ninth Circuit were confounded by an interpretation of the bankruptcy code that permitted individual chapter 11 debtors to retain a significant portion of their assets without creditor consent. The problem was particularly vexing in the context of high net worth individuals, some of whom held multiple ownership interests in entities that held valuable assets or generated significant income. That loophole was finally closed on January 28, 2016 when the Ninth Circuit Court of Appeals determined that the “absolute priority rule” applies i