This paper focuses on a key property of asset-backed securities (ABS); namely, that ABS are designed to achieve "bankruptcy remoteness"of the securitized assets from the borrowing …rm. This provides lenders with maximal protection from dilution that is not available with other contracts, such as secured debt. ABS can have real eects in allowing …rms to commit to more e¢ cient investment decisions in bankruptcy. We show that securitization of replaceable assets (such as receivables) prevents ine¢ cient continuation in bankruptcy, but securitization of necessary assets can lead to ine¢ cient liquidations. In these circumstances, secured debt and/or leases can be preferred. Our model also predicts that greater legal risk of "bankruptcy remoteness"being undermined by courts leads to lower overall e¢ ciency and higher interest rates for ABS investors. We test this second prediction using a controversial decision in the Chap- ter 11 bankruptcy of LTV Steel, in which a securitization contract was unexpectedly treated as a secured loan. Using a dierence-in-dierences approach, we …nd that ABS spreads for securitizers eligible for Chapter 11 increased signi…cantly more than spreads for insured bank securitizers, who are not Chapter 11-eligible, in the period fol- lowing the LTV …ling. The results demonstrate that the creditor protection provided by "bankruptcy remoteness"is indeed valuable and priced in …nancial markets.