Lesson from Argentina’s debt crisis

Since 2011, Argentina lost more than half of its foreign reserves. Moody’s Investor Service and Standard & Poor’s rate its credits seven notches below investment grade. Its negotiations with bondholders failed and some filed for a Supreme Court decision. Argentina defaulted on its bondholder payments but continued to negotiate. This is the second time in recent history that Argentina defaulted on its bonds. In 2001, the government defaulted on record $95 billion bonds. Some investors made a deal to get payments over five year period and accepted 70 cents on the dollar. But diehard group, including Elliott Management, who are holding more than $15 billion bonds are holding out and demanding payments.

Individuals should learn from Argentina’s mistakes. Getting into too much debt even a country can’t make payments cause havoc on your finances. Creditors such as credit card companies, auto loan companies can take legal action against you. Also, before you reach that point and receive calls from debt collectors, try working with them to get some relief. Failing all your attempts to get relief, you may seek bankruptcy protection. However, you cannot get relief from student loans from a bankruptcy filing. It will have a lasting effect on your credit.