Vermont § 605 - § 3—605.

§ 605. § 3—605.

• Discharge of indorsers and accommodation parties (a) In this section, the term “indorser” includes a drawer having the obligation described
  in section 3—414(d) of this title. (b) Discharge, under section 3—604 of this title, of the obligation of a party to pay an instrument does not discharge the obligation
  of an indorser or accommodation party having a right of recourse against the discharged
  party. (c) If a person entitled to enforce an instrument agrees, with or without consideration,
  to an extension of the due date of the obligation of a party to pay the instrument,
  the extension discharges an indorser or accommodation party having a right of recourse
  against the party whose obligation is extended to the extent the indorser or accommodation
  party proves that the extension caused loss to the indorser or accommodation party
  with respect to the right of recourse. (d) If a person entitled to enforce an instrument agrees, with or without consideration,
  to a material modification of the obligation of a party other than an extension of
  the due date, the modification discharges the obligation of an indorser or accommodation
  party having a right of recourse against the person whose obligation is modified to
  the extent the modification causes loss to the indorser or accommodation party with
  respect to the right of recourse. The loss suffered by the indorser or accommodation
  party as a result of the modification is equal to the amount of the right of recourse
  unless the person enforcing the instrument proves that no loss was caused by the modification
  or that the loss caused by the modification was an amount less than the amount of
  the right of recourse. (e) If the obligation of a party to pay an instrument is secured by an interest in collateral
  and a person entitled to enforce the instrument impairs the value of the interest
  in collateral, the obligation of an indorser or accommodation party having a right
  of recourse against the obligor is discharged to the extent of the impairment. The
  value of an interest in collateral is impaired to the extent (i) the value of the
  interest is reduced to an amount less than the amount of the right of recourse of
  the party asserting discharge, or (ii) the reduction in value of the interest causes
  an increase in the amount by which the amount of the right of recourse exceeds the
  value of the interest. The burden of proving impairment is on the party asserting
  discharge. (f) If the obligation of a party is secured by an interest in collateral not provided
  by an accommodation party and a person entitled to enforce the instrument impairs
  the value of the interest in collateral, the obligation of any party who is jointly
  and severally liable with respect to the secured obligation is discharged to the extent
  the impairment causes the party asserting discharge to pay more than that party would
  have been obliged to pay, taking into account rights of contribution, if impairment
  had not occurred. If the party asserting discharge is an accommodation party not entitled
  to discharge under subsection (e) of this section, the party is deemed to have a right
  to contribution based on joint and several liability rather than a right to reimbursement.
  The burden of proving impairment is on the party asserting discharge. (g) Under subsection (e) or (f) of this section, impairing value of an interest in collateral
  includes (i) failure to obtain or maintain perfection or recordation of the interest
  in collateral, (ii) release of collateral without substitution of collateral of equal
  value, (iii) failure to perform a duty to preserve the value of collateral owed, under
  Article 9 of this title or other law, to a debtor or surety or other person secondarily
  liable, or (iv) failure to comply with applicable law in disposing of collateral. (h) An accommodation party is not discharged under subsection (c), (d), or (e) of this
  section unless the person entitled to enforce the instrument knows of the accommodation
  or has notice under section 3—419(c) of this section that the instrument was signed
  for accommodation. (i) A party is not discharged under this section if (i) the party asserting discharge
  consents to the event or conduct that is the basis of the discharge, or (ii) the instrument
  or a separate agreement of the party provides for waiver of discharge under this section
  either specifically or by general language indicating that parties waive defenses
  based on suretyship or impairment of collateral. (Added 1993, No. 158 (Adj. Sess.), § 12, eff. Jan. 1, 1995.)