Bankruptcy ~ Section 544

bk544 Bankruptcy Mainbk544

BANKRUPTCY CODE § 544 (11 USC § 544)

Trustee As Lien Creditor And As Successor To Certain Creditors And Purchasers

(a) {Omitted for brevity}


(1) Except as provided in paragraph (2), the trustee may avoid any transfer of an interest of the debtor in property or any obligation incurred by the debtor that is voidable under applicable law by a creditor holding an unsecured claim that is allowable under section 502 of this title or that is not allowable only under section 502(e) of this title.

11 USC § 544(b)(1) authorizes the bankruptcy trustee to utilize state voidable transactions law (a/k/a "applicable law") to set aside a fraudulent transfer or obligation, which provision is very often used for the reason that state voidable transaction law typically offers a longer four-year extinguishment period than the ridiculously short one-year period in § 550.

(2) Paragraph (1) shall not apply to a transfer of a charitable contribution (as that term is defined in section 548(d)(3)) that is not covered under section 548(a)(1)(B), by reason of section 548(a)(2). Any claim by any person to recover a transferred contribution described in the preceding sentence under Federal or State law in a Federal or State court shall be preempted by the commencement of the case.

Paragraph (b)(2) basically says that even if state voidable transactions law is utilized in lieu of the federal bankruptcy fraudulent transfer provision at § 548, the exemption for charitable contributions found at § 548(a)(1)(B) is still available in bankruptcy even if that exemption would not be available under state law.