Bankruptcy Administration Improvement Act of 2025
- Bill Number
- H.R. 3867
- Origin Chamber
- House
- Congress
- 119th Congress, Session 1
- Policy Area
- Finance and Financial Sector
- Status
- Introduced
- Latest Action
- 2025-06-10: Referred to the House Committee on the Judiciary.
- Last Updated
- 2026-02-09T21:17:25Z
AI-Generated Summary
Purpose of the Legislation
The Bankruptcy Administration Improvement Act of 2025 aims to update the U.S. bankruptcy system by increasing compensation for trustees who handle basic liquidation bankruptcies (known as chapter 7 cases), adjusting related fees to keep the system self-funded without taxpayer costs, and extending the terms of temporary bankruptcy judges to manage growing caseloads. It emphasizes fairness in funding while preserving access for low-income individuals.
Key Provisions
- Trustee Compensation: Doubles the base pay for chapter 7 trustees from $60 to $120 per case in most situations (increasing the portion from $45 to $105, with the remaining $15 unchanged). Trustees receive no pay in cases where filing fees are waived for indigent (low-income) filers. Excess filing fees after trustee pay are allocated to specific Treasury funds: $63.51 to a court fund, $25 to a deficit reduction fund, and $51.49 to the U.S. Trustee System Fund (which supports oversight of bankruptcy cases).
- Fee Adjustments:
- Increases quarterly fees for chapter 11 business reorganizations (a type of bankruptcy where companies restructure debt) by raising the rate from 0.8% to 1.1% of quarterly disbursements (money paid out in the case), and extends the fee structure from 5 years to 10 years.
- Updates deposits into the U.S. Trustee System Fund: Changes the percentage of certain fees from 28.33% to a new formula, and extends the deposit period from 2026 to 2031.
- For fiscal years 2026 through 2031, $5.4 million of chapter 11 quarterly fees each year goes to the general Treasury fund, with the rest supporting the trustee system.
- Extension of Temporary Judgeships: Extends the terms of various temporary bankruptcy judge positions (created by prior laws in 2017 and 2020) from 5 years to 10 years across multiple judicial districts, to handle increased business and consumer bankruptcy filings.
- Effective Date: Most changes start on the first October 1 after enactment. Trustee pay applies to new chapter 7 cases or conversions from other bankruptcy types after that date. Fee changes apply to ongoing chapter 11 cases and quarterly payments starting after that date. Filing fees for chapter 7 remain unchanged, and courts retain authority to waive them for those unable to pay.
Significant Changes to Existing Law
- Compensation Update: Since 1994, chapter 7 trustee pay has been fixed at $60 per case (not adjusted for inflation, equivalent to about $125 today based on consumer price estimates). This bill permanently increases it to $120, reversing a short-lived 2021 adjustment that only lasted one year. It also repeals a prior subsection on fee handling to simplify distribution.
- Fund Deposits and Percentages: Alters how chapter 7 filing fees and chapter 11 quarterly fees are split among funds, increasing support for the U.S. Trustee System while directing a fixed amount to the Treasury. Extends timelines for fee collections and deposits by five years (e.g., from 2026 to 2031).
- Judgeship Terms: Converts multiple temporary judgeships (in districts like those in Virginia, North Carolina, and others) from 5-year terms to 10-year terms, building on 2017 and 2020 acts without creating new positions.
Potential Impacts
- On Government Agencies: Strengthens the self-funding of the bankruptcy system, benefiting the U.S. Trustee Program (part of the Department of Justice) by increasing its fund deposits. Agencies like the IRS, Department of Agriculture, and Small Business Administration gain from better asset recovery in chapter 7 cases, as trustees liquidate debtor assets to pay creditors, including governments. Courts receive steady funding without relying on general taxpayer money.
- On Citizens: Improves access to bankruptcy relief for individuals, especially low-income debtors, by keeping chapter 7 filing fees the same and preserving waiver options. Creditors (e.g., medical providers, small businesses, and unsecured lenders) may see higher recoveries from chapter 7 cases due to better-compensated trustees handling more efficiently. No direct impact on international relations, as this is a domestic judicial funding matter.
- Broader Effects: Could reduce backlogs in bankruptcy courts by extending judge terms, speeding up case resolutions for consumers and businesses facing financial distress.
Main Stakeholders Affected
- Chapter 7 Bankruptcy Trustees: Primary beneficiaries, as they receive higher pay for administering cases (liquidating assets to pay debts), encouraging more professionals to serve in this role.
- Bankruptcy Courts and Judges: Gain extended temporary positions to manage rising caseloads from consumer and business filings.
- Debtors and Creditors: Individuals filing for chapter 7 (personal bankruptcy) and chapter 11 (business reorganization) benefit from a more stable, efficient system; creditors, including governments and private entities, see potential for better debt repayment.
- U.S. Government Entities: The Department of Justice's U.S. Trustee Program, Treasury funds, and creditor agencies like the IRS are directly impacted through adjusted funding and asset recoveries.
- Low-Income Filers: Protected by unchanged fees and waiver rights, ensuring bankruptcy remains accessible without added costs.
Notable Legal, Constitutional, or Political Implications
- Legal Implications: Reinforces the bankruptcy system's self-funding mandate under existing law (e.g., via periodic Attorney General reports on the U.S. Trustee Fund), without altering core debtor protections or court authority. Changes are technical, focusing on fee mechanics to avoid deficits, and apply prospectively to new or ongoing cases to prevent retroactive disruptions.
- Constitutional Implications: None apparent; the bill aligns with Congress's Article I authority over bankruptcy laws and judicial administration, maintaining equal treatment across U.S. trustee districts and non-trustee regions (like some territorial courts).
- Political Implications: Promotes bipartisanship (introduced by Representatives Cline and Ivey from different parties) by addressing long-overdue trustee pay while ensuring no net cost to taxpayers. It highlights Congress's role in monitoring judicial funding amid inflation and caseload growth, potentially setting a precedent for periodic adjustments to keep the system equitable and operational.
This summary was generated by AI and may contain inaccuracies. Refer to the official source document for the authoritative text.
Sponsor
Cosponsors (12)
Rep. Ivey, Glenn [D-MD-4], Rep. Grothman, Glenn [R-WI-6], Rep. Castor, Kathy [D-FL-14], Rep. Gooden, Lance [R-TX-5], Rep. Lawler, Michael [R-NY-17], Rep. Bynum, Janelle S. [D-OR-5], Rep. Harris, Mark [R-NC-8], Rep. Vindman, Eugene Simon [D-VA-7], Rep. Mannion, John W. [D-NY-22], Rep. Lee, Laurel M. [R-FL-15], Rep. Correa, J. Luis [D-CA-46], Rep. Rutherford, John H. [R-FL-5]
Recent Actions
- 2025-06-10: Referred to the House Committee on the Judiciary.
- 2025-06-10: Introduced in House
- 2025-06-10: Introduced in House
Bill Versions
- Bankruptcy Administration Improvement Act of 2025 — issued 2025-06-10 — PDF (10 pages)