How the Bankruptcy Administration Improvement Act of 2025 Reshapes Trustee Compensation and System Funding

The Bankruptcy Administration Improvement Act of 2025 modernizes how the federal bankruptcy system is funded and administered, with a particular focus on Chapter 7 trustee compensation, U.S. Trustee System funding, and temporary bankruptcy judgeships.

Big-picture purpose

The Act amends titles 11 and 28 of the U.S. Code to strengthen the infrastructure of the bankruptcy system while keeping it self-funded, i.e., at no net cost to taxpayers. Congress expressly links these changes to preserving system integrity, ensuring adequate oversight, and avoiding under-compensation of trustees whose statutory fees had not meaningfully changed since the 1990s.

Key changes to Chapter 7 trustee compensation

• The Act increases Chapter 7 trustee compensation so their total per‑case compensation for most no‑asset cases rises to approximately 120 dollars, a level designed to reflect inflation since the original 60‑dollar amount was set in 1994.
• It does this in part by raising the statutory flat fee component in 11 U.S.C. § 330(b)(1) from 45 dollars to 105 dollars, with the balance coming from existing fee components, producing a materially higher baseline for routine cases.
• Congress characterizes this adjustment as overdue and “proportionate” to the level intended in 1994, noting that 60 dollars in 1994 would exceed 120 dollars in today’s dollars, and that prior attempts to provide a raise only produced a one‑year bump.

Funding changes and U.S. Trustee System

• The Act reaffirms and operationalizes the principle that the bankruptcy system is self‑funded through user fees (filing fees, Chapter 11 quarterly fees, and related charges), rather than general tax revenues.
• It adjusts how fees collected under 28 U.S.C. § 1930 are allocated: after paying Chapter 7 trustees under the revised § 330(b)(1), remaining amounts are directed into the U.S. Trustee System Fund, with specific sums (including a 5.4‑million‑dollar amount) deposited into the general Treasury as provided by the Act.
• To support these funding needs, the Act increases certain Chapter 11 quarterly fees borne by larger debtors, resulting in relatively modest incremental costs for large businesses but providing a stable revenue stream to fund enhanced trustee compensation and program operations.

Extension of temporary bankruptcy judgeships

• The Act extends the terms of existing temporary bankruptcy judgeships that were previously authorized under the Bankruptcy Administration Improvement Act of 2020, effectively maintaining additional judges in districts with heavier caseloads.
• This extension is framed as necessary to prevent backlogs, preserve timely access to the bankruptcy courts, and ensure adequate judicial capacity during periods of elevated filing activity.

Practical implications for debtors, creditors, and practitioners

• For consumer debtors, some filing‑related or system fees may tick upward at the margins, but the expectation is that better‑resourced trustees and sufficient judgeships will translate into more efficient case processing and more reliable administration.
• Creditors, including governmental and domestic‑support creditors singled out in the findings, stand to benefit from trustees who have more time and incentive to investigate assets, pursue avoidance actions, and maximize recoveries in liquidation cases.
• For practitioners, the Act means recalibrated economics of Chapter 7 practice (more sustainable trustee work, possible changes in no‑asset case scrutiny) and slightly higher Chapter 11 cost structures that should be factored into restructuring budgets and venue strategy.

Effective Date

Most amendments made by the Act take effect on the October 1 that first occurs after the date of enactment. As President Trump signed the Bankruptcy Administration Improvement Act of 2025 on January 15, 2026, these provisions will become effective on October 1, 2026.