I have heard plenty of times that one shouldn't use bar soap on Shabbat. What are the sources for this Pesak and why is this so?
My LOR says Yesh Al Mi Lismoch but I would like to see a nice treatment of the Sugya.
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Chicago Community Kollel Parsha Encounters Oct 23, 2009 discusses the issues with bar soap.
The Rama (326:10) writes that it is forbidden to wash one's hands with soap on Shabbos. Three reasons are given for this prohibition. The Rama explains that using soap on Shabbos causes it to turn into liquid, which is a violation of Nolad (creating a new entity).
This reason is not accepted by the Magen Avraham (brought in Mishna Berura 326:30). He argues that the main purpose of soap is not to serve as a liquid, and therefore, the prohibition of Nolad is not relevant to soap.
A second reason for the prohibition, mentioned by the Mishna Berura ibid., is that using soap is in violation of Mimarayach (smearing). Many Poskim argue that this reason only applies to soap used in previous generations, which was rough and needed to be smoothed. This would not apply to bar soap used in modern times, which is quiet smooth. (Some brands of bar soap have pointy edges; perhaps smoothing those edges is in violation of Mimarayach. Additionally, if a bar of soap remains in water for some time, it can become pasty and soft. If one wipes off the soft part in order to smooth out the bar, he may have violated the prohibition of Mimarayach.)
A third reason quoted by the Mishna Berura, is that soap may be so abrasive that it will pull out hair on Shabbos. This reason, too, does not apply to modern soap.
In conclusion, there is a universal custom to avoid using bar soap on Shabbos. Although the rationale behind this custom may be unclear, we dare not tamper with this custom (Mishna Berura 326:30, Aruch Hashulchan 326:11, Shmiras Shabbos Khilchasa 14:16, Ben Ish Chai II Yisro 15, Kitzur Hilchos Shabbos 32:4). However in extenuating circumstances one may wash his hands using bar soap. It is preferable, however, to use the soap under running water (Shmiras Shabbos Khilchasa 40:11).