New Bankruptcy Improvement Legislation Reduces Chapter 11 Fees

The “Bankruptcy Administration Improvement Act of 2020” was signed into law on Wednesday. The act previously passed the Senate and the House of Representatives. Among its provisions, the bill reduces the amount of quarterly fees paid and simplifies the free structures in Chapter 11 cases. It also provides for the distribution of Chapter 11 bankruptcy fees made to the U.S. Trustee System Fund for the costs of administering payments and Chapter 7 trustee compensation, establishes the Chapter 7 Trustee Fund and associated fees, and extends the temporary office of bankruptcy judges in specified judicial districts.

The bill was introduced and passed by the Senate on Dec. 9. The House of Representatives passed the legislation without objection on Dec. 21.

“ABI commends Congress and the President for their work to have the ‘Bankruptcy Administration Improvement Act’ signed into law,” Amy Quackenboss, executive director at the American Bankruptcy Institute, said. “Amid the economic challenges brought on by the COVID-19 pandemic, this law will ensure that the court system is sufficiently equipped to help struggling consumers and businesses achieve a financial fresh start through bankruptcy.”

Other provisions of the act include:

• An extension of all temporary bankruptcy judgeships five years from their current lapse date. The effect would extend eight judgeships through 2025, 14 through 2027 and three through 2029.

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• $5.4 million to offset the cost of extending the 25 bankruptcy judgeships.

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• Adequate funding of the U.S. Trustee Program by continuing to provide for the offset of its appropriations.

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• The use of a portion of any surplus from the Chapter 7 Trustee Fund and associated fees to provide the first increase in nearly 30 years of the fee paid to private trustees appointed in Chapter 7 liquidation cases, including cases that convert from Chapter 11 to Chapter 7, and to pay the costs of the Administrative Office of the U.S. Courts in administering these payments.

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• The deposit of any excess funds back into the U.S. Trustee System Fund.

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