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Section 4 of the Bankruptcy Act excludes from both voluntary and involuntary bankruptcy municipal, railroad, insurance and banking corporations and building and loan associations, and excludes from involuntary bankruptcy corporations that are not "moneyed, business or commercial." The exclusion of railroad and municipal corporations lost much of its significance when special reorganization provisions were enacted for those corporations. Insurance and banking corporations and building and loan associations, on the other hand, are excluded from the Bankruptcy Act's corporate reorganization chapters as well as from straight bankruptcy; and creditors can no more compel a corporation that is not moneyed, business or commercial to reorganize than they can compel it to liquidate.

This article will be concerned with several questions raised by section 4. First, how have bankruptcy courts defined banks, insurance corporations, building and loan associations and corporations that are not moneyed, business or commercial ? Second, how should these terms be defined? And, third, should all, or any, of these exclusions be retained? We shall preface our discussion of these questions with a summary of the legislative history of section 4 since corporations were first made amenable to bankruptcy in 1867.


Bankruptcy Law | Law