{"data":{"id":"us-ky/krs-355.3-605","jurisdiction":"us-ky","citation":"KRS 355.3-605","heading":"Discharge of secondary obligors.","body":"(1) If a person entitled to enforce an instrument releases the obligation of a principal\nobligor in whole or in part, and another party to the instrument is a secondary\nobligor with respect to the obligation of that principal obligor, the following rules\napply:\n(a) Any obligations of the principal obligor to the secondary obligor with respect\nto any previous payment by the secondary obligor are not affected. Unless the\nterms of the release preserve the secondary obligor's recourse, the principal\nobligor is discharged, to the extent of the release, from any other duties to the\nsecondary obligor under this article;\n(b) Unless the terms of the release provide that the person entitled to enforce the\ninstrument retains the right to enforce the instrument against the secondary\nobligor, the secondary obligor is discharged to the same extent as the principal\nobligor from any unperformed portion of its obligation on the instrument. If\nthe instrument is a check and the obligation of the secondary obligor is based\non an ind orsement of the check, the secondary obligor is discharged without\nregard to the language or circumstances of the discharge or other release; and\n(c) If the secondary obligor is not discharged under paragraph (b) of this\nsubsection, the secondary obligor i s discharged to the extent of the value of\nthe consideration for the release, and to the extent that the release would\notherwise cause the secondary obligor a loss.\n(2) If a person entitled to enforce an instrument grants a principal obligor an extension\nof the time at which one (1) or more payments are due on the instrument and\nanother party to the instrument is a secondary obligor with respect to the obligation\nof that principal obligor, the following rules apply:\n(a) Any obligations of the principal obli gor to the secondary obligor with respect\nto any previous payment by the secondary obligor are not affected. Unless the\nterms of the extension preserve the secondary obligor's recourse, the extension\ncorrespondingly extends the time for performance of any other duties owed to\nthe secondary obligor by the principal obligor under this article;\n(b) The secondary obligor is discharged to the extent that the extension would\notherwise cause the secondary obligor a loss; and\n(c) To the extent that the secondary ob ligor is not discharged under paragraph (b)\nof this subsection, the secondary obligor may perform its obligations to a\nperson entitled to enforce the instrument as if the time for payment had not\nbeen extended or, unless the terms of the extension provide that the person\nentitled to enforce the instrument retains the right to enforce the instrument\nagainst the secondary obligor as if the time for payment had not been\nextended, treat the time for performance of its obligations as having been\nextended correspondingly.\n(3) If a person entitled to enforce an instrument agrees, with or without consideration,\nto a modification of the obligation of a principal obligor other than a complete or\npartial release or an extension of the due date and another party to the instrument is\na secondary obligor with respect to the obligation of that principal obligor, the\nfollowing rules apply:\n(a) Any obligations of the principal obligor to the secondary obligor with respect\nto any previous payment by the secondary obligor are n ot affected. The\nmodification correspondingly modifies any other duties owed to the secondary\nobligor by the principal obligor under this article;\n(b) The secondary obligor is discharged from any unperformed portion of its\nobligation to the extent that the  modification would otherwise cause the\nsecondary obligor a loss; and\n(c) To the extent that the secondary obligor is not discharged under paragraph (b)\nof this subsection, the secondary obligor may satisfy its obligation on the\ninstrument as if the modifi cation had not occurred, or treat its obligation on\nthe instrument as having been modified correspondingly.\n(4) If the obligation of a principal obligor is secured by an interest in collateral, another\nparty to the instrument is a secondary obligor with re spect to that obligation, and a\nperson entitled to enforce the instrument impairs the value of the interest in\ncollateral, the obligation of the secondary obligor is discharged to the extent of the\nimpairment. The value of an interest in collateral is impa ired to the extent the value\nof the interest is reduced to an amount less than the amount of the recourse of the\nsecondary obligor, or the reduction in value of the interest causes an increase in the\namount by which the amount of the recourse exceeds the v alue of the interest. For\npurposes of this subsection, impairing the value of an interest in collateral includes\nfailure to obtain or maintain perfection or recordation of the interest in collateral,\nrelease of collateral without substitution of collateral  of equal value or equivalent\nreduction of the underlying obligation, failure to perform a duty to preserve the\nvalue of collateral owed, under Article 9 of this chapter or other law, to a debtor or\nother person secondarily liable, and failure to comply wi th applicable law in\ndisposing of or otherwise enforcing the interest in collateral.\n(5) A secondary obligor is not discharged under subsections (1)(c), (2), (3), or (4) of\nthis section unless the person entitled to enforce the instrument knows that the\nperson is a secondary obligor or has notice under KRS 355.3 -419(3) that the\ninstrument was signed for accommodation.\n(6) A secondary obligor is not discharged under this section if the secondary obl igor\nconsents to the event or conduct that is the basis of the discharge, or the instrument\nor a separate agreement of the party provides for waiver of discharge under this\nsection specifically or by general language indicating that parties waive defenses\nbased on suretyship or impairment of collateral. Unless the circumstances indicate\notherwise, consent by the principal obligor to an act that would lead to a discharge\nunder this section constitutes consent to that act by the secondary obligor if the\nsecondary obligor controls the principal obligor or deals with the person entitled to\nenforce the instrument on behalf of the principal obligor.\n(7) A release or extension preserves a secondary obligor's recourse if the terms of the\nrelease or extension provide that:\n(a) The person entitled to enforce the instrument retains the right to enforce the\ninstrument against the secondary obligor; and\n(b) The recourse of the secondary obligor continues as if the release or extension\nhad not been granted.\n(8) Except as o therwise provided in subsection (9) of this section, a secondary obligor\nasserting discharge under this section has the burden of persuasion both with respect\nto the occurrence of the acts alleged to harm the secondary obligor and loss or\nprejudice caused by those acts.\n(9) If the secondary obligor demonstrates prejudice caused by an impairment of its\nrecourse, and the circumstances of the case indicate that the amount of a loss is not\nreasonably susceptible of calculation or requires proof of facts that ar e not\nascertainable, it is presumed that the act impairing recourse caused a loss or\nimpairment equal to the liability of the secondary obligor on the instrument. In that\nevent, the burden of persuasion as to any lesser amount of the loss is on the person\nentitled to enforce the instrument.","path":[],"source_url":"https://apps.legislature.ky.gov/law/statutes/statute.aspx?id=33506","current_through":"Includes enactments through the 2026 Regular Session","vintage":"09/05/2026","retrieved_at":"2026-09-05T20:58:44Z","sha256":"cf50612bfc43323ac02a2df1a62cf0d4b0f135eb78b4ce7f4e4497bc8d0288cb","source_id":"us-ky","stale":false,"prev":"us-ky/krs-355.3-604","next":"us-ky/krs-355.3-606"},"notice":"GroundRules: Original legal text. Not legal advice."}