I study how the denomination of debt contracts depends on the nature of uncertainty. Firms issue nominal or indexed debt subject to financing constraints as well as productivity and monetary shocks. For low levels of deflation risk, the value of collateral is less volatile when measured nominally. For this reason, fully nominal debt contracts allow for higher leverage at a small interest rate premium. But when deflation risk is larger than downside productivity risk, debt contracts become partially indexed, causing deleveraging and output loss.