A key question in the academic and policy debates over the optimal architecture for sovereign debt has long been whether sovereigns should be given access to bankruptcy or its contractual equivalent. One side of the debate cries moral hazard, saying that the cost of government borrowing will rise if governments have the option to access bankruptcy. Proponents of the other side see bankruptcy as a means to solve a coordination problem and reduce the cost of government borrowing. Using data on disclosures made by issuers of municipal bonds in the U.S., this Article attempts to measure the extent to which investors care about access to bankruptcy as an indicator of the level of risk they face in lending. These findings suggest that investors care a lot less than academics and policy makers do.