We study how relationship lending affects the transmission of bankruptcy reforms on credit terms and bank enforcement mechanisms, using a unique database containing the universe of credits of a large Italian bank. Lower creditor rights lead the bank to reduce expected recovery rates, worsen credit terms, and tighten bank enforcement actions. Bank-borrower power dampens the terms’ impact at the cost of tougher borrower renegotiations. Older and more credit-dependent borrowers receive less unfavorable terms but see larger increases in credit suspensions and legal actions. Results suggest that policies curbing credit enforcement weaken the role of bank power in dampening economic shocks. This paper was accepted by Bo Becker, finance. Funding: M. Ghitti thanks Elio Ghitti and Orlando Patelli for financial support. Supplemental Material: The online appendix and data files are available at https://doi.org/10.1287/mnsc.2024.05949 .