Kentucky Revises Provisions Relating to Recovery of Interest Upon Default and Other Contract Obligations

Kentucky recently revised its statutes governing contracts to specify that parties are entitled to recover interest at the rate expressed in a contract after a default occurs, and that an obligation to satisfy a debt is not extinguished by any internal action taken by a creditor for certain purposes.

Specifically Chapter 360, Section 10 of the Kentucky Revised Statutes was amended to provide that a party is entitled to recover interest, after a default occurs, at the interest rate specified in a written contract.  If the interest rate expressed in the written contract is a variable rate, the interest rate after the default and until judgment will be calculated and adjusted as provided in the contract before the default occurred.  However, if the contract does not specify an interest rate, the party will be entitled to recover interest, after the default and until judgment, at the legal interest rate of 8%.  Further, no state law prescribing or limiting interest rates will apply to the contract.

Kentucky also added a new section to Chapter 371 of the Kentucky Revised Statutes to specify that any action taken by a creditor, for the purpose of the creditor’s own financial, tax, accounting records, or affairs, does not extinguish any obligation to pay or satisfy a debt.  In addition, a debtor will not be precluded from proving that the debtor has fully or partially paid, or otherwise satisfied the debt in accordance with the terms of the debt.