Brazil's EC 136/2025 introduces uncertainty for court-ordered debt payments

Constitutional Amendment (EC) 136/2025 has fundamentally altered the management of court-ordered debts, known as precatórios, in Brazil. The amendment establishes annual payment limits for the Union, states, federal district, and municipalities, calculated based on a percentage of their Net Current Revenue (RCL). These limits range from 1% to 5% depending on the volume of the debt backlog.

This change has introduced significant uncertainty regarding payment timelines, as there is no longer a fixed deadline for clearing the existing backlog of debts. For example, in the State of São Paulo, the backlog reached nearly R$ 40 billion in 2025. In the capital of São Paulo, payments were being made for debts issued in 2009, but the new amendment removes such predictability.

The amendment also modifies how credits are updated, utilizing the IPCA index plus simple interest of 2% per year, capped by the Selic rate. This adjustment may impact the final value received by creditors if payments are delayed. The Brazilian Bar Association (OAB) has challenged the constitutionality of the amendment through Direct Action of Unconstitutionality (ADI) 7873, citing concerns over legal certainty and the acquired rights of creditors.