We don’t tend to give debt and budgeting tips to countries but what if Greece was a person who approached us for debt advice – how could we help?
And importantly, what would the effect of a default be on its European partners? How will the economy of Greece cope?
First of all it seems Mr Greece is living far beyond his means. He’s relying on handouts from friends and family and credit just to maintain his day to day costs. We’d never recommend taking out further credit in this situation. Even these consolidation loans mean that the deeper problem is just kicked further down the line.
Mr Greece needs to put together an accurate income (we’d need to know what he urns) and expenditure budget that made provision for all his essential costs. Once these are taken care of anything that’s left over would determine which debt solution suited him best.
2. Debt solutions
Depending on Mr Greece’s surplus he might be able to do a debt management plan to repay his creditors as much as he can afford. We administrate these plans free of charge if he’s interested.
In a debt management plan he would repay all the money that he owes, and his creditors may continue to add interest and charges as per the original agreement.
A successful plan usually takes around five years, however this depends on the level of debt. We believe Mr Greece’s debt to be rather higher than the average.
Depending on his level of debt, assets and surplus income Mr Greece might also consider solutions such as a debt relief order. There are strict criteria to qualify for such a scheme but it would give him a time frame after which he would be debt free.
An Individual Voluntary Arrangement (IVA) might also match his circumstances but to get this arrangement in place Mr Greece would need the agreement of 75% of creditors in value who vote at his meeting. If he can’t get an IVA approved his other options could include bankruptcy.
Sadly, bankruptcy may be the best option for Mr Greece; it’s often the quickest and cheapest way to become debt free, but the consequences can be harsh. He would be handing over his finances to the official receiver who might not look kindly on some of what he sees as essential expenditure and he may lose some of his old antiquities. Mr Greece might also be forced to realise some of his assets, even if they are in ruins.
The most important thing is that we’d guide Mr Greece through the options available to him and make it clear that all of these options would affect his credit rating.
4. Credit rating
What about the other people who are living with Mr Greece in the same house? Of course they’re all worried that their own credit will be downgraded because of Mr Greece’s financial troubles.
Mr Greece’s financial problems will only have an adverse affect on anyone he has a joint account or credit commitment with (or, perhaps in unique circumstances, one that he shares a currency with).
Whatever debt option Mr Greece chooses it’s fair to say he might not be able to afford to splash out for a while, but by coming to StepChange Debt Charity he would be able to say kalinýchta to his current uncertainty and find some light at the end of the tunnel.
Personal debt help
If you’re suffering from debt issues we’d recommend that you use our online counselling service which will help to find a solution to your problems quickly.
We can’t offer advice to countries and, we admit, don’t know much about currency defaults. We do offer free and impartial advice for people with personal debt issues however.