(Chapter 12 case with confirmation delayed until U.S. Supreme Court ruling in Hall on whether post-petition taxes dischargeable which Court later determined were not estate obligations that could be treated as unsecured claims; reorganization plan then submitted that proposed paying post-petition taxes through plan with estate assets; confirmation denied and case converted to Chapter 7; real estate and equipment sold and Chapter 7 discharge received; creditor filed motion for marshaling of assets; bank held first mortgage on land, first priority lien on equipment and first priority lien on crop proceeds and creditor held second priority lien on equipment and crop proceeds and no junior mortgage on real estate; basic issue is that insufficient funds in bankruptcy estate to pay all claims and IRS has claim for priority taxes; denial of marshaling would allow more non-tax debt to be paid and debtor claims that allowing marshaling would inhibit fresh start; court noted that “inequity” of other creditor receiving less or nothing is not a valid reason to deny marshaling; requirements for marshaling satisfied; creditors restated motion to marshal assets granted as real estate has been sold and fact that creditor’s receipt of portion of sale proceeds will prevent IRS debt from being reduced not grounds to deny marshaling which prefers interests of junior lienholder; hearing to be held to address issues of distribution including trustee compensation).
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