Non-consensual third-party releases remain a controversial topic in bankruptcy proceedings. The validity of such releases in the context of settlement within a Chapter 11 plan continues to be attacked by dissenting creditors. While at times, objections have addressed the release of derivative claims, the more controversial topic is a release of direct claims held by creditors and/or equity holders. The former is regarded as property of the estate subject to the provisions of Chapter 11 of the Bankruptcy Code and undoubtedly a core bankruptcy matter, while the latter must find its support in the extent to which it is “related to” bankruptcy and vital to the plan.
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