By Ed Boltz, 9 February, 2026

Bankruptcy Administration Improvement Act of 2025 — Summary and Commentary

I. Big Picture

The Bankruptcy Administration Improvement Act of 2025 does three principal things:

Doubles the “no-asset” Chapter 7 trustee fee from $60 to $120 per case;
Rebalances how filing and quarterly fees are allocated to fund the U.S. Trustee System; and
Extends temporary bankruptcy judgeships created in 2020 from 5 years to 10 years.

Congress presents the Act as necessary to keep the bankruptcy system self-funding, stabilize staffing, and preserve judicial capacity in both consumer and business cases.

II. Chapter 7 Trustee Compensation — and the Indexing Lesson

What changed

The Act amends 11 U.S.C. § 330(b)(1) to raise the trustee’s base payment from $45 to $105, resulting in $120 total per no-asset case. Congress expressly relied on the Consumer Price Index to justify the increase, noting that $60 in 1994 would equal over $125 today in real purchasing power.

The Act also directs how the remaining Chapter 7 filing fee is divided among the Treasury, deficit-reduction fund, and the U.S. Trustee System Fund.

Why this matters beyond trustees

Congress’s willingness to use inflation data to modernize trustee pay exposes a deeper inconsistency in bankruptcy policy: we index compensation, but we leave debtor protections frozen.

If appropriate economic indexes are good enough to adjust trustee compensation, they are also good enough to modernize state exemptions that determine whether debtors can actually keep a home, a car, or basic property after filing.

III. Fee structure and U.S. Trustee funding

The Act converts certain percentage allocations to fixed dollar allocations to the U.S. Trustee System Fund and extends key deposit provisions through 2031. It also diverts $5.4 million per year (FY 2026–2031) from Chapter 11 quarterly fees to the general Treasury, with the remainder flowing to the UST Fund.

Policy takeaway: Congress sought stability for the UST Program without raising consumer filing fees—a result that aligns closely with NACBA’s long-standing position.

IV. What higher trustee pay should mean going forward

With compensation now increased—explicitly justified by economic indexing—Chapter 7 trustees, the U.S. Trustee Program, and Bankruptcy Administrators should:

Continue to scrutinize marginal “small-asset” cases where the only real beneficiaries are the trustee and trustee’s counsel, while the debtor loses property that produces little or no net benefit for creditors.
Support (or at least stop opposing) exemption modernization, particularly in states where limits are badly outdated.

Priority states for reform

North Carolina: Replace or substantially raise the $35,000 homestead cap and tie future increases to an appropriate housing or cost-of-living index.
Pennsylvania: Modernize homestead and personal-property exemptions that remain among the weakest in the country.
New Jersey and Virginia: Update shelter and vehicle protections to reflect contemporary markets.

If we are comfortable indexing trustee pay to economic reality, we should be equally comfortable indexing debtor protections to the same reality.

IV. Exemption Reform — The Indexing Logic That Should Run Both Ways

Congress’s decision to rely on the Consumer Price Index to justify doubling the Chapter 7 “no-asset” trustee fee carries implications that extend well beyond trustee compensation. By acknowledging that static dollar amounts become unfair and dysfunctional over time, Congress implicitly accepted a basic principle of bankruptcy policy: key dollar thresholds in the system should track real economic conditions rather than remain frozen for decades.

That principle has long been applied—at least in part—to fees, budgets, and compensation within the bankruptcy infrastructure. What has been conspicuously absent is a comparable commitment to keeping consumer exemptions aligned with modern economic reality. Yet exemptions are just as central to the functioning of the system as trustee pay: they define whether an “honest but unfortunate” debtor actually receives a meaningful fresh start or instead emerges from bankruptcy worse off than before.

If appropriate economic and housing-cost indexes are good enough to modernize what the system pays to administer cases, they are also good enough to modernize what debtors are allowed to keep when they file. Rather than arguing over a single metric like CPI, legislatures should commit to using appropriate, transparent financial and housing-price indexes so that exemptions rise with market conditions instead of quietly eroding over time.

North Carolina as the case study

North Carolina sharpens the contrast between frozen statutory exemptions and a housing market that has changed dramatically.

The North Carolina homestead exemption in N.C.G.S. § 1C-1601 was last increased in 2009 and remains capped at $35,000. In 2009, the median sales price of an existing single-family home in North Carolina was about $155,000. Against that benchmark, a $35,000 homestead protected roughly 22% of the median home’s value.

Today, however, the statewide median home price is approximately $385,000–$400,000. To protect the same share of housing value that the exemption covered in 2009 (about 22%), North Carolina’s homestead exemption would need to be roughly $85,000 today. Instead, the statute still protects less than 10% of a typical home’s value.

This is not merely an inflation story; it is a story about policy neglect. By failing to index exemptions to any sensible measure of housing costs, North Carolina has allowed the practical value of its homestead protection to shrink to a fraction of what it once was—precisely the kind of outcome that undermines the fresh-start promise of bankruptcy. The National Consumer Law Center’s Exemptions Report Card (a press release regarding North Carolina is attached) has repeatedly flagged this weakness, and the market data make clear why reform is overdue.

VI. Extension of temporary bankruptcy judgeships

The Act amends the Bankruptcy Administration Improvement Act of 2020 (28 U.S.C. § 152 note) to extend multiple temporary bankruptcy judgeships from 5 years to 10 years, along with a related extension under the Bankruptcy Judgeship Act of 2017. In North Carolina, this appears to mean that the temporary judgeship in the Middle District has been extended.

Why this matters for consumers:

More judges = fewer backlogs, quicker hearings, and less procedural friction for Chapter 7 and 13 debtors who already face resource constraints. This should also maintain the depth of the bankruptcy bench, particularly in a time where the number of cases is rising.

VII. Here is your revised section, expanded to weave in ESCRA and the Student Loan Bankruptcy Improvement Act while keeping your original structure and policy thrust:

What This Act Signals About Broader Bankruptcy Legislation

Although the Bankruptcy Administration Improvement Act of 2025 is sensible and welcome on its own terms, it also represents a missed opportunity. Congress could have used this same vehicle to reinstate the higher debt limits for Chapter 13—and, for those who care about small-business reorganization, the parallel increase for Subchapter V—that expired in 2024.

Those temporarily increased limits had real-world consequences. They made Chapter 13 available to many middle-income families who otherwise get pushed into Chapter 7, and they meaningfully expanded access to Subchapter V for small businesses that needed a workable reorganization tool. Their lapse has already begun to squeeze debtors out of reorganizational relief and back into liquidation frameworks that often serve neither debtors nor creditors particularly well.

Still, the fact that Congress was able to move a bipartisan, technical bankruptcy bill—raising Chapter 7 trustee compensation, stabilizing U.S. Trustee funding, and preserving judicial capacity—demonstrates that there remains substantial, cross-party support for pragmatic bankruptcy legislation when issues are framed as system-improvement rather than ideological fights.

That bipartisan opening is also visible in other consumer-focused bills now moving through Congress:

The Ending Scam Credit Repair Act (ESCRA) (H.R. 306), introduced by Representatives McBride (D-DE) and Young Kim (R-CA), would protect consumers by barring credit-repair organizations from charging fees until six months after they have proven that a consumer’s credit score has actually improved, while increasing civil penalties for violations. Equally important for our bar, the bill would clearly and explicitly confirm that consumer bankruptcy attorneys may continue to provide lawful advice, counsel, and assistance to their clients—recognizing that bankruptcy lawyers are part of the solution for financially distressed families, not part of the problem.
The Student Loan Bankruptcy Improvement Act of 2025 (H.R. 4444), introduced by Representative Luis Correa, would remove the word “undue” from the hardship standard in § 523(a)(8), making it meaningfully easier for courts to grant student-loan relief in appropriate cases and better aligning the statute with the traditional fresh-start principles of bankruptcy.

Taken together with the trustee-fee legislation, these proposals suggest that Congress is again willing to engage in practical, bipartisan reform at the intersection of consumer protection and bankruptcy law.

There is therefore good reason to hope that:

the Chapter 13 debt-limit increase, and
the parallel Subchapter V expansion

can again gain traction and begin moving through Congress, either as standalone measures or as part of other legislation.

In short, while this Act strengthens the administrative infrastructure of the bankruptcy system, it should also be read as a reminder that Congress—and state legislatures—can act in this space. That momentum should be harnessed not only to restore modern, realistic debt limits, but also to reform bankruptcy exemptions so that they expand, rather than contract, access to a meaningful fresh start and to provide greater protections and relief for student borrowers and consumers facing credit repair scams.

To read a copy of the transcript, please see: