{"data":{"id":"us-ky/krs-355.9-408","jurisdiction":"us-ky","citation":"KRS 355.9-408","heading":"Restrictions on assignment of promissory notes, health -care-insurance","body":"receivables, and certain general intangibles ineffective.\n(1) Except as otherwise provided in subsections (2) and (6) of this section, a term in a\npromissory note or in an agreement between an account debtor and a debtor which\nrelates to a health -care-insurance receivable or a general intangible, including a\ncontract, permit, license, or franchise, and which term prohibits, restricts, or\nrequires the consent of  the person obligated on the promissory note or the account\ndebtor to, the assignment or transfer of, or creation, attachment, or perfection of a\nsecurity interest in, the promissory note, health -care-insurance receivable, or\ngeneral intangible, is ineffective to the extent that the term:\n(a) Would impair the creation, attachment, or perfection of a security interest; or\n(b) Provides that the assignment or transfer or the creation, attachment, or\nperfection of the security interest may give rise to a defaul t, breach, right of\nrecoupment, claim, defense, termination, right of termination, or remedy\nunder the promissory note, health -care-insurance receivable, or general\nintangible.\n(2) Subsection (1) of this section applies to a security interest in a payment intangible\nor promissory note only if the security interest arises out of a sale of the payment\nintangible or promissory note, other than a sale pursuant to a disposition under KRS\n355.9-610 or an acceptance of collateral under KRS 355.9-620.\n(3) (a) Except as otherwise provided in paragraph (b) of this subsection and\nsubsection (6) of this section, a rule of law, statute, or regulation that\nprohibits, restricts, or requires the consent of a government, governmental\nbody or official, person obligated on a p romissory note, or account debtor to\nthe assignment or transfer of, or creation of a security interest in, a promissory\nnote, health -care-insurance receivable, or general intangible, including a\ncontract, permit, license, or franchise between an account de btor and a debtor,\nis ineffective to the extent that the rule of law, statute, or regulation:\n1. Would impair the creation, attachment, or perfection of a security\ninterest; or\n2. Provides that the assignment or transfer or the creation, attachment, or\nperfection of the security interest may give rise to a default, breach, right\nof recoupment, claim, defense, termination, right of termination, or\nremedy under the promissory note, health -care-insurance receivable, or\ngeneral intangible.\n(b) Paragraph (a) of this subsection does not apply to the following statutes,\nincluding administrative regulations promulgated under the authority of those\nstatutes: KRS 304.2 -260, KRS 304.24 -420, Subtitle 33 of KRS Chapter 304,\nand Subtitle 37 of KRS Chapter 304.\n(4) To the extent that a term in a promissory note or in an agreement between an\naccount debtor and a debtor which relates to a health -care-insurance receivable or\ngeneral intangible or a rule of law, statute, or regulation described in subsection (3 )\nof this section would be effective under law other than this article but is ineffective\nunder subsection (1) or (3) of this section, the creation, attachment, or perfection of\na security interest in the promissory note, health -care-insurance receivable, or\ngeneral intangible:\n(a) Is not enforceable against the person obligated on the promissory note or the\naccount debtor;\n(b) Does not impose a duty or obligation on the person obligated on the\npromissory note or the account debtor;\n(c) Does not require the  person obligated on the promissory note or the account\ndebtor to recognize the security interest, pay or render performance to the\nsecured party, or accept payment or performance from the secured party;\n(d) Does not entitle the secured party to use or ass ign the debtor's rights under the\npromissory note, health -care-insurance receivable, or general intangible,\nincluding any related information or materials furnished to the debtor in the\ntransaction giving rise to the promissory note, health -care-insurance\nreceivable, or general intangible;\n(e) Does not entitle the secured party to use, assign, possess, or have access to\nany trade secrets or confidential information of the person obligated on the\npromissory note or the account debtor; and\n(f) Does not entitl e the secured party to enforce the security interest in the\npromissory note, health-care-insurance receivable, or general intangible.\n(5) This section prevails over any inconsistent provisions of the following statutes and\nany administrative regulations ba sed on those statutes: KRS 56.230(3), 138.320(5),\n138.665(5), 138.720(5), 139.250, 154A.400(3), 190.047(1), 190.070(2)(c),\n217B.535(2), 230.300(11), 234.330(6), 243.630(2), 260.815, 286.4 -460(2),\n292.320(3)(b), 286.8 -036(3), 304.3 -410(2)(f), 304.3 -520(5), 333.080, 350.135(1),\n365.430(1), and 286.9-070(6).\n(6) This section does not apply to a security interest in an ownership interest in a\ngeneral partnership, limited partnership, or limited liability company.\n(7) In this section, \"promissory note\" includes a negotiable instrument that evidences\nchattel paper.","path":[],"source_url":"https://apps.legislature.ky.gov/law/statutes/statute.aspx?id=55702","current_through":"Includes enactments through the 2026 Regular Session","vintage":"09/05/2026","retrieved_at":"2026-09-05T20:58:48Z","sha256":"72178b6ec55da4ead55277800fd962288fc2062aa1f1403cc669058e118173a9","source_id":"us-ky","stale":false,"prev":"us-ky/krs-355.9-407","next":"us-ky/krs-355.9-409"},"notice":"GroundRules: Original legal text. Not legal advice."}