I am doing some research on third party releases and I just want to get some clarification.
Upon confirmation of a reorganization plan in a chapter 11 case, the debts of the bankrupt entity are discharged pursuant to §1141(d) of the Bankruptcy Code. 11 U.S.C. §1141(d) (2003). While this discharge does not apply to non-debtor entities, debtors have sought to expand the scope of the discharge to include the release of claims against third-party non-debtor entities including insiders and affiliates of the debtor.
At the moment, the Ninth and Tenth Circuits flatly prohibit nonconsensual third-party releases on the basis that 11 U.S.C. § 524(e), which provides generally that “discharge of a debt of the debtor does not affect the liability of any other entity on, or the property of any other entity for, such debt,” prohibits them. Most circuits, however, hold that the broad sweep of 11 U.S.C. § 105—which permits bankruptcy judges to “issue any order, process or judgment that is necessary or appropriate to carry out the provisions” of the Code—authorizes courts to immunize non-debtors under certain circumstances
Question 1 in regards to "While this discharge does not apply to non-debtor entities" so if I'm understanding, non-debtors/third parties are not discharged through a regular chapter 11 discharge? and instead they have to get a release? am I reading that correctly?
Question 2 in regards to "which provides generally that “discharge of a debt of the debtor does not affect the liability of any other entity on, or the property of any other entity for, such debt," what does it mean "does not effect the liability" does that mean the non-debtor/third party can still collect from the debtor after the debtor uses It's discharge and discharges It's debts?