Municipal bankruptcy occurs when a municipality cannot pay its debts, an extremely rare situation in Canada. Unlike the United States, where cities like Detroit have filed for bankruptcy protection, Canadian municipalities cannot declare bankruptcy under federal bankruptcy law. When municipalities face severe financial distress, the province must intervene—potentially appointing administrators, mandating restructuring, or in extreme cases forcing amalgamation with neighbouring municipalities. Provincial oversight of municipal borrowing and balanced budget requirements are designed to prevent such crises. The few cases of Canadian municipal insolvency have involved provincial takeover of financial management.