Distressed firms often raise liquidity by stripping collateral from syndicated-loan creditors and pledging it to new lenders---an emerging practice known as “creditor-on-creditor violence.” We model this phenomenon. An insolvent firm needs liquidity to avoid bankruptcy but cannot observe potential investors' required returns. This information asymmetry leads to inefficient bankruptcies in equilibrium. This inefficiency resembles debt overhang: equity holders negotiate selfishly, potentially blocking surplus-enhancing financing, to reduce wealth transfers to existing creditors. By diverting collateral from existing creditors, equity holders capture more surplus from financing, aligning incentives and improving efficiency. Our theory explains why new debt contracts still permit creditor-on-creditor violence.