Last updated: October 2026
If you are behind on your property taxes and also carrying credit card or loan debt, it is natural to hope one plan could cover all of it. “Council tax arrears” is the British term; in Canada the bill is municipal property tax, and the short answer is that property tax arrears usually cannot be included in a debt management plan, because a DMP covers unsecured debts and unpaid property taxes are secured against your home.
Canadian Debt Relief is an independent Canadian guide to debt relief options — consumer proposals, debt management plans, debt consolidation and bankruptcy — for people who want to understand their choices before they talk to anyone.
What are property tax arrears, and is “council tax” the same thing?
Property tax arrears are municipal property taxes that remain unpaid after their due date, plus the penalties and interest the municipality adds. “Council tax” is the United Kingdom’s name for a similar local tax; the Canadian rules in this article are what apply here.
In Ontario, the Municipal Act, 2001 allows a penalty and interest of up to 1.25% a month on overdue taxes — 15% a year, more than most consolidation loans. Unlike a credit card balance, these arrears are a lien on the property, ranking ahead of nearly every other creditor, including your mortgage lender in most provinces.
Why can’t property tax arrears go in a debt management plan?
A debt management plan cannot include property tax arrears because a DMP only covers unsecured debts. The Financial Consumer Agency of Canada (2026) describes a debt management plan as an informal proposal a credit counsellor makes to your creditors to combine credit cards, lines of credit and unsecured personal loans into one monthly payment — not mortgages, car loans or other secured obligations.
A municipality also has stronger collection tools than any bank, so it expects to be paid in full on its own schedule. What a DMP can do is shrink your other payments enough that a municipal arrangement becomes affordable.
What happens if you don’t pay property taxes in Canada?
Unpaid property taxes grow by the municipal penalty each month, and after two years of arrears in Ontario — with similar timelines elsewhere — the municipality can start a tax sale that ends with your home being sold. Under Ontario’s Municipal Act, 2001 and the Municipal Tax Sales Rules (O. Reg. 181/03), the municipality may register a tax arrears certificate on title once taxes are two years in arrears; you then have one year to pay the full “cancellation price” — arrears, penalties, interest and costs — or the property can be sold by public tender. An extension agreement can spread that amount out, but it must be signed before the year runs out.
Long before a tax sale, lenders treat unpaid property taxes as a mortgage default, and some will pay the arrears themselves and add the amount, plus a fee, to your mortgage.
What are the pros of pairing a municipal plan with a DMP?
Paying the municipality on an agreed schedule stops the tax sale clock.
A DMP combines cards, lines of credit and loans into one payment at 0% to low interest.
Neither arrangement is a proceeding under the Bankruptcy and Insolvency Act.
A DMP’s R7 note leaves your file sooner than a consumer proposal or bankruptcy.
What are the cons?
Penalties keep accruing on the taxes until they are cleared.
Municipalities expect 100% of the arrears plus penalties.
A DMP is voluntary and does not stop a lawsuit or garnishment already under way.
Expect a setup fee plus roughly $40 to $75 a month; see what DMPs really cost.
Who should consider this approach?
A municipal payment plan combined with a DMP fits best when:
- You want to keep your home and the tax arrears are less than about two years old.
- Your unsecured debt is mostly credit cards and lines of credit.
- You have steady income and could cover both payments once card interest stops.
- You want to avoid a consumer proposal or bankruptcy on your credit file.
Who should look at something else?
This approach is probably not enough when:
- A tax arrears certificate is already registered and the one-year window is running out — ask about an extension agreement immediately.
- Your unsecured debt cannot be repaid in full within five years even at 0%; a consumer proposal can settle it for less.
- Your mortgage is also in arrears.
- You are facing wage garnishment or a lawsuit, which a DMP does not stop.
What does it cost? A worked example
Suppose an Ontario homeowner owes $8,000 in property tax arrears and $22,000 on credit cards at 20.99%.
On the combined route the homeowner pays about $835 a month for two years, then $498 for two more, and is clear in four years. Try your own numbers in our debt management plan calculator.
How do you deal with property tax arrears step by step?
- Get the exact arrears figure. Ask the municipal tax office for a statement of arrears, penalties and interest, and whether a tax arrears certificate has been registered.
- Ask the municipality for a payment arrangement. Most accept a written pre-authorized plan of 12 to 24 months, and some waive future penalties while you stay current.
- Tell your mortgage lender that a municipal plan is in place, so it does not pay the arrears and add them to your mortgage.
- List every other debt and its rate, including CRA balances and payday loans.
- Compare a DMP with a consumer proposal. A non-profit credit counselling agency can set up a DMP for the unsecured debts. If the total cannot be repaid within five years, only a Licensed Insolvency Trustee can file a consumer proposal, which settles the unsecured portion for a fraction of what you owe.
- Automate both payments. Pre-authorize them on payday and switch to the municipality’s monthly tax plan so arrears do not rebuild; our guide on missed DMP payments explains why one slip matters.
Ready to see if you qualify?
Frequently asked questions
Can property tax arrears be included in a consumer proposal?
Generally no. A consumer proposal, which the Office of the Superintendent of Bankruptcy (2026) describes as a plan for debts of up to $250,000 excluding a principal-residence mortgage, deals with unsecured creditors. Property tax arrears are secured against the home, so you keep paying the municipality during the proposal while it settles your credit cards, loans and CRA income tax debt.
How long can property taxes go unpaid in Canada before the home is sold?
In Ontario, a municipality can register a tax arrears certificate after two years of arrears and sell the property if the full cancellation price is not paid within one year of registration, under the Municipal Act, 2001 and O. Reg. 181/03. British Columbia’s annual tax sale applies after three years of delinquent taxes; Alberta’s tax recovery can begin after more than one year.
Will unpaid property taxes affect my credit score?
Not directly, because municipalities do not report to Equifax or TransUnion, although a mortgage default triggered by unpaid taxes will. A DMP is reported as an R7 on each included account for the life of the plan plus two years, as our guide to how debt management plans work explains.
Can I use a consolidation loan or home equity to pay property tax arrears?
Yes, if you qualify. On $8,000 of property tax arrears, a home equity line of credit at around 6% to 7% costs far less than a 15% municipal penalty rate, and a $30,000 consolidation loan at 11% over 60 months runs about $652 a month and clears the taxes and the cards together. Our guide to DMPs versus home equity walks through when each makes sense.
Does bankruptcy wipe out property tax arrears?
No. Bankruptcy discharges unsecured debts, but property tax arrears stay attached to the property as a secured claim, so the municipality is paid either by you or from sale proceeds. Our comparison of consumer proposals and bankruptcy explains the difference.
After 20 years of structuring multi-million dollar corporate debt facilities and corporate turnarounds in investment banking, Marcus now leads Canadian Debt Relief to apply those exact same balance-sheet optimization frameworks to Canadian household debt.
