Xbox Live Party System Chat Quits Working When Overwatch Round Starts?

It is for every game, When I am in a party and I go to game chat it does not work when I am not even in a party it does not work and for Overwatch it tells you when you are in game chat and yet I still can not hear or talk to anyone although it will show
when others are talking.

This is a wellllll known issue. There is a work around for this issue, however. Have everyone that you want to start a party with go to the home screen. THEN make sure you all quit out of your current games by highlighting the game and pressing the menu
button and hitting quit. Then start a party and turn on party chat. That should work!

It's quite strange how the evolution of Xbox Live has become more insular with the advent of party chat. Back in the days of Beta and Xbox One, people had no choice but to chat to each other and take the insults as they come (they were few and far between).
I'm no fan of party chat but it's not like Battlefield makes chat easy... their system is broken in game as well.

Alright, there have been no updates this month so that can't be the issue.

When in a party sometimes someone's chat option will default to game chat. In the part menu highlight your gamertag, press A and select Party Chat.

If that doesn't work then press the Guide button and while in the Home section highlight Party Chat, press Start and select Quit.

You could also try heading to Settings and choosing Devices then link the controller to your gamertag to see if that works.

Hopefully that will help.

Who ever sat round a table and decided this new party chat system was a good idea needs there heads looking at.