I study the effect on firms of a reform that increases private creditors’ protection. In 2005 Brazil reformed its outdated bankruptcy law in order to stimulate private lending to firms. The new law gave private investors priority over government in credit recovery cases and put local civil courts in charge of dealing with such cases. Using firm level data and a new dataset on the efficiency of civil courts across Brazilian federal states, I find that firms operating under a more efficient judicial system experienced larger growth in their capital intensity and productivity upon introduction of the new bankruptcy law. I present the sketch of a model that captures the main stylized facts emerging from the empirical analysis.