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This paper integrates the problem of designing corporate bank-ruptcy rules into a theory of optimal debt structure. We show that, in an optimal contracting framework with imperfect renegotiation, hav-ing multiple creditors increases a firm’s debt capacity while increasing its incentives to default strategically. The optimal debt contract gives creditors claims that are jointly inconsistent in case of default. Bank-ruptcy rules are therefore a necessary part of the overall financing contract, to make claims consistent and to prevent a value reducing run for the assets of the firm. We characterize these rules, with pre-dictions about the allocation of security rights, the right to trigger bankruptcy and the symmetry of treatment of creditors in default