The announcement came just hours after last-minute talks in New York with a group of bondholders failed. The bond-holders are demanding a full pay-out of $1.3 billion. Argentina says the bondholders are "vultures" using the South American country's debt problems to make a big profit.
The investors are US hedge funds that bought debt cheaply after Argentina's economic crisis in 2001-2002. They are also known as "hold-outs" because they did not sign up to a restructuring of debt, which the majority of bondholders agreed to in 2005 and 2010.
Under that deal, investors agreed to settle for about a third of what they were originally owed. However, hedge funds NML and Aurelius Capital Management bought up a large chunk of the remaining distressed debt at low prices. They demand to be paid the full face value of their holding.
The Argentine government had expected the dispute to go all the way to the US Supreme Court, which would have bought the country more time. However, in June, the Supreme Court declined to hear Argentina's appeal against the decision of a lower court that made it liable for the money.
Under that court's ruling, Argentina cannot use the US financial system to keep paying the restructured bondholders unless it also pays the "vulture funds," placing it in technical default.