Companies seeking to confirm a Chapter 11 bankruptcy plan typically include releases that discharge the bankrupt company (the debtor) from liability on claims, thereby giving the debtor a chance to emerge from bankruptcy and seek a profitable future. However, Chapter 11 plans may also seek to discharge debts owed not by the debtor, but by a third party. Such third party releases are controversial and based in largely unsettled law. The releases are important because they have the potential to completely cut off recovery against parties who were not even creditors in the debtor’s bankruptcy case.
To learn more, click on the link below to an article recently published by the online news site Hotel News Now: