KRS 355.4A-502: Creditor process served on receiving bank -- Set-off by beneficiary's

bank.

(1) As used in this section, "creditor process" means levy, attachment, garnishment,

notice of lien, sequestration, or similar process issued by or on behalf of a creditor

or other claimant with respect to an account.

(2) This subsection applies to creditor process with respect to an authorized account of

the sender of a payment order if the creditor process is served on the receiving bank.

For the purpose of determining rights with respect to the creditor process, if the

receiving bank accepts the payment order the balance in the authorized account is

deemed to be reduced by the amount of the payment order to the extent the bank did

not otherwise receive payment of the order, unless the creditor process is served at a

time and in a manner affording the bank a reasonable opportunity to act on it before

the bank accepts the payment order.

(3) If a beneficiary's bank has received a payment order for payment to the beneficiary's

account in the bank, the following rules apply:

(a) The bank may credit the beneficiary's account. The amount credited may be

set off against an obligation owed by the beneficiary to the bank or may be

applied to satisfy creditor process served on the bank with respect to the

account.

(b) The bank may credit the beneficiary's account and allow withdrawal of the

amount credited unless creditor process with respect to the account is served

at a time and in a manner affording the bank a reasonable opportunity to act to

prevent withdrawal.

(c) If creditor process wit h respect to the beneficiary's account has been served

and the bank has had a reasonable opportunity to act on it, the bank may not

reject the payment order except for a reason unrelated to the service of

process.

(4) Creditor process with respect to a pay ment by the originator to the beneficiary

pursuant to a funds transfer may be served only on the beneficiary's bank with

respect to the debt owed by that bank to the beneficiary. Any other bank served with

the creditor process is not obliged to act with respect to the process.