Default occurs when a borrower fails to make required debt payments on time, breaching the loan agreement. For municipalities, default is extremely rare in Canada due to strong provincial oversight, regulatory debt limits, stable tax bases, and the essential nature of municipal services. When a municipality cannot meet its obligations, provinces typically intervene with emergency measures, supervised restructuring, or even direct management—default leading to bankruptcy is essentially impossible under Canadian law (unlike the United States where municipal bankruptcy exists). The rarity of default means municipal bonds carry very low risk, resulting in favourable interest rates. However, even approaching financial difficulty damages a municipality's credit rating, increases future borrowing costs, and can trigger provincial intervention in local governance.