In the case of In re Rajapakse, 346 B.R. 233 (Bkrtcy.N.D.Gla.2005)(Massey, J.), the Chapter 7 Trustee sought an order directing the pro se chapter 7 Debtor to turn over certain property located outside of the U.S. The Debtor claimed that the property was not property of the estate and was outside the Court's jurisdiction. The Court granted the Trustee's motion and directed the Debtor to turn over and account for all the foreign assets.
Section 541 provides that the commencement of a case creates an estate comprised of property listed in Section 541(a) with certain exceptions, "wherever located and by whomever held." 11 USC 541 (a). The court noted that the phrase "wherever located and by whomever held" is extremely broad and could be interpreted to cover property owned outside of the U.S. The court pointed out though that Section 541 does not expressly state that it applies outside of the U.S.
The court discussed that Congress has the power to enact a statute that applies beyond the territorial borders of the U.S, but that there is a presumption that Acts of Congress do not ordinarily apply outside the borders of the U.S. If a statute does not expressly state that is applies outside of the U.S., a court must determine whether Congress intended the statue to have extraterritorial effect. E.E.O.C. v. Arabian Am. Oil Co., 499 U.S. 244, 248 (1991).
The court concluded that while Section 541 is ambiguous regarding its possible extraterritorial effect, its legislative history is not. The court noted that the House Report accompanying a 1952 amendment to Section 541 makes its clear that a trustee in bankruptcy is vested with the title of the bankrupt in property within or without the U.S. The court noted that Collier on Bankruptcy confirms this interpretation that Section 70a of the Act was amended in 1952 to make it clear that a trustee in bankruptcy is vested with the title to property within or without the U.S. by the addition of the words "wherever located." Collier on Bankruptcy, Vol. $A, para 70.03, p. 35 (14th Ed. 1978). The court noted that other courts addressing this issue have reached the same conclusion. See, e.g. H.K. and Shanghai Banking Corp. v. Simon, 153 F.3d 991, 996 (9th Cir.1998), GMAM Investment Funds Trust I v. Blobo Comunicacoes E. Participacoes S.S, 317 B.R. 235 (S.DN.Y.2004), Deak & Co. v. Soedjono, 63 B.R. 422, 427 (Bankr.S.D.N.Y.1986), Nakash v. Zur, 190 B.R. 763, 768 (Bankr.S.D.N.Y.1996), In re Yukos Oil Co. 321 B.R. 396, 406 (Bankr.S.D.Tex.2005).