Kentucky Promissory Note Templates

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A Kentucky promissory note is a legally binding document that records the financial details of a loan. It can be used in a court of law in the event the borrower defaults on the loan. The promissory note serves as solid evidence that a loan has taken place, in case the borrower disputes the existence of the loan.

In Kentucky, there are secured promissory notes and unsecured promissory notes, which both have different legal implications.

Kentucky Secured Promissory Note

A secured promissory note Kentucky form includes collateral in case the borrower fails to repay the loan. This gives the lender the right to claim the collateral upon non-payment. A classic example of a secured promissory note is a mortgage loan. In this case, the home is provided as collateral if the loan is not paid.

Kentucky Unsecured Promissory Note

An unsecured promissory note doesn’t include collateral. Thus, if the borrower fails to repay, the lender cannot relinquish their assets. But with a promissory note template for Kentucky, you can create your own legally binding agreement. A free Kentucky promissory note covers both parties in a transaction.

Frequently Asked Questions

In Kentucky, a promissory note is valid for 15 years if signed after July 1, 2014. For promissory notes signed after this date, the statute of limitations is six years.

For a secured promissory note signed in Kentucky, the first step a lender should take is to make it clear that the loan is secured. If not, in a legal dispute, the court may treat the promissory note as unsecured. By specifying what type of promissory note it is, the lender can make it easier to enforce it.

On the other hand, if the promissory note is unsecured, there is no guarantee the lender will be able to recover the damages incurred by the non-payment of the loan.

In Kentucky, the borrower records a promissory note by debiting the cash account and crediting the notes payable account.

For any income a lender generates from a promissory note, it must be reported to the IRS. The amount of taxes paid on the promissory note depends on the interest rate on the loan.

To collect from a promissory note in Kentucky, a lender must first take action before the promissory note expires, which is six years. If the promissory note hasn’t expired, the lender may do the following (although no method is guaranteed):

  1. Send the borrower notice of non-payment. Give them a certain amount of time to make the payment.
  2. Use a collection agency. If the borrower does not make a payment towards the loan, a lender may seek the help of a collection agency to collect the funds.
  3. Go to court. If the borrower still has not made an attempt to repay the loan, file a petition with the court.

Depending on the terms of the purchase agreement, either the buyer or seller is responsible for paying documentary stamp taxes on promissory notes for mortgages.