31.1 Given the case above, breifly identify the Issue, the Legal Rule (Legal Tes

Question

31.1 Given the case above, breifly identify the Issue, the Legal Rule (Legal Test), the Facts Applied to the Test (Analysis), and the Conclusion/ Holding of the case.

In re Anderson ed States Court of Appeals, Fourth Circuit, 811 F.3d 166 (2016) Background and Facts Henry Anderson filed a voluntary petition in a federal bankruptcy court for lief under Chapter 11 of the Bankruptcy Code. The U.S. Department of the Treasury, through the Internal Revenue Service (IRS), filed a proof of claim against the bankruptcy estate for $997,551.80, of which $987,082.88 was secured by the debtor's property. Stubbs & Perdue, P.A., served as Anderson's counsel. During the proceedings, the court approved compensation of $200,000 to Stubbs for its ser vices. These fees constituted an unsecured claim against the estate for administrative expenses. Later Anderson's case was converted to a Chapter 7 liquidation. The trustee accumulated $702,630.25 for distribution to the estate's creditors-not enough to pay the claims of both the IRS and Stubbs. The trustee excluded Stubbs's claim. Stubbs objected. The court dismissed Stubbs's objection. A federal strict court upheld the dismissal. Stubbs appealed, arguing that the IRS's claim should be subordi- nated to Stubbs's claim for fees. In the Language of the Court Pamela HARRIS, Circuit Judge any of the events at issue here, Section 724(b)(2) provided all holders of admin istrative expense claims, like Stubbs, with the right to subordinate secured tax creditors in Chapter 7 liqui dations. But that statutory scheme was criticized on the ground that it created perverse incentives couraging Chapter 11 debtors and their representatives to incur administrative expenses even where was no real hope for a successful reorganization, to the detriment of secured tax creditors when 7 liquidation ultimately proved necessary Congress responded with a fix to limit the class of administrative expenses covered by Sec unse tion 724(b)(2)... In order to provide greater protection for holders of tax liens* admin tive expense claims would no longer take priority over secured tax claims in Chapter 7 liquida rative Emphasis added.) The Bankruptcy Technical Corrections Act [BTCA1·"clarified that Chapter 1 I administra en months later, the Debtor's bankruptcy case converted from Chapter 11 to Chapter 7 ense claimants do not hold subordination rights under Section 724(b)(2) g Section 724(b)(2) for the first time As a general rule, a court is to apply the law in effect at the time it renders its decision. [Emphasis Case 31.1 Continue

Explanation / Answer

31.1 Given the case above, breifly identify the Issue, the Legal Rule (Legal Test), the Facts Applied to the Test (Analysis), and the Conclusion/ Holding of the case.

In re Anderson ed States Court of Appeals, Fourth Circuit, 811 F.3d 166 (2016) Background and Facts Henry Anderson filed a voluntary petition in a federal bankruptcy court for lief under Chapter 11 of the Bankruptcy Code. The U.S. Department of the Treasury, through the Internal Revenue Service (IRS), filed a proof of claim against the bankruptcy estate for $997,551.80, of which $987,082.88 was secured by the debtor's property. Stubbs & Perdue, P.A., served as Anderson's counsel. During the proceedings, the court approved compensation of $200,000 to Stubbs for its ser vices. These fees constituted an unsecured claim against the estate for administrative expenses. Later Anderson's case was converted to a Chapter 7 liquidation. The trustee accumulated $702,630.25 for distribution to the estate's creditors-not enough to pay the claims of both the IRS and Stubbs. The trustee excluded Stubbs's claim. Stubbs objected. The court dismissed Stubbs's objection. A federal strict court upheld the dismissal. Stubbs appealed, arguing that the IRS's claim should be subordi- nated to Stubbs's claim for fees. In the Language of the Court Pamela HARRIS, Circuit Judge any of the events at issue here, Section 724(b)(2) provided all holders of admin istrative expense claims, like Stubbs, with the right to subordinate secured tax creditors in Chapter 7 liqui dations. But that statutory scheme was criticized on the ground that it created perverse incentives couraging Chapter 11 debtors and their representatives to incur administrative expenses even where was no real hope for a successful reorganization, to the detriment of secured tax creditors when 7 liquidation ultimately proved necessary Congress responded with a fix to limit the class of administrative expenses covered by Sec unse tion 724(b)(2)... In order to provide greater protection for holders of tax liens* admin tive expense claims would no longer take priority over secured tax claims in Chapter 7 liquida rative Emphasis added.) The Bankruptcy Technical Corrections Act [BTCA1·"clarified that Chapter 1 I administra en months later, the Debtor's bankruptcy case converted from Chapter 11 to Chapter 7 ense claimants do not hold subordination rights under Section 724(b)(2) g Section 724(b)(2) for the first time As a general rule, a court is to apply the law in effect at the time it renders its decision. [Emphasis Case 31.1 Continue

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