Business Bankruptcy in Colorado: 5 Facts for a Denver Filing

Colorado's federal courts sit in eight towns by statute, and its bankruptcy court lists one. A ski rental company in Durango, a feedlot supplier near Sterling, and a restaurant group in LoDo all file business bankruptcy in Colorado with the same clerk, at the Custom House, 721 19th Street, in Denver.

The Code applied there is the Code applied everywhere: the automatic stay of section 362, the $3,424,000 Subchapter V ceiling in effect since April 1, 2025, the $1,738 chapter 11 filing fee. Five facts about the Denver court and about Colorado law are local, and one of them, the court's rule on cash collateral motions, bears on a business carrying merchant cash advances.

1. Eight Statutory Court Sites, One Bankruptcy Courthouse

Under 28 U.S.C. 85, "Colorado constitutes one judicial district. Court shall be held at Boulder, Colorado Springs, Denver, Durango, Grand Junction, Montrose, Pueblo, and Sterling." There are no divisions to choose among. The bankruptcy court's own locations page names only Denver.

So the venue question that consumes a paragraph in a state with several districts collapses here into one line: if 28 U.S.C. 1408 points to Colorado, it points to Denver, and a Grand Junction owner should plan on Denver.

2. The First 21 Days Have a Procedure of Their Own

The court's Local Bankruptcy Rules, as amended effective December 1, 2021, give chapter 11 a short run of rules at 2081. L.B.R. 2081-1, titled "Initial Motions" in chapter 11, provides that "During the first 21 days following entry of the Order for Relief, the debtor may obtain expedited consideration for entry of orders by filing a Motion Seeking Expedited Entry of Order(s) and Notice of Impending Hearing Thereon." L.B.R. 2081-2 addresses certain chapter 11 notices and a limited notice list, and L.B.R. 2081-3 addresses motions to dismiss or convert.

Twenty-one days is the window the rule sets aside for matters that will not wait, the payroll motion and the operating account among them. After it closes, the ordinary motion calendar applies.

3. Denver Makes a Lender's Terms Show Their Page Numbers

A company that owes merchant cash advances often discovers, on the morning after filing, that a funder claims a security interest in its receivables and in the cash those receivables become. Section 363(c)(2) of the Code then forbids using that cash collateral unless the secured party consents or the court, after notice and a hearing, authorizes it. What the motion must say is local, and the District of Colorado's answer is L.B.R. 4001-2, "Cash Collateral and Post-Petition Financing."

The rule requires the motion to summarize the essential terms: among them the "maximum borrowing available on a final basis," the "interim borrowing limit," the interest rate, fees, maturity, and events of default. It then requires the movant to identify, by page and paragraph, and to justify, a set of provisions that includes "Cross-collateralization," binding findings on "the validity, perfection or amount of the secured party's lien or debt," and any waiver of the debtor's right to seek non-consensual use of cash collateral under section 363(c)(2)(B).

That last item deserves a second reading. A debtor that agrees, in an early stipulation with a funder, never to ask the court for cash collateral use over the funder's objection has surrendered the one statutory route that does not depend on the funder's goodwill, and Colorado's rule makes the surrender visible (it does not forbid it, which is a distinction that a debtor under pressure in the first week, with payroll due and a funder offering consent in exchange for concessions, may not appreciate until the second month, when the consent is withdrawn and the waiver remains).

The binding-findings item works the same way. A merchant cash advance funder's lien may be sound, or it may rest on a contract whose character as a sale or a loan is contested and a UCC filing whose scope is arguable. An interim order that finds the lien valid, perfected, and in a stated amount forecloses those arguments before anyone has made them. The rule does not stop a debtor from agreeing. It stops the debtor from agreeing quietly.

Whether a particular funder holds a perfected interest in a particular company's deposits is a question of the contract, the filing, and the case law, and it is not one this page can answer in the abstract.

4. Region 19 Oversees Three States From Stout Street, and Mediation Waits to Be Requested

The U.S. Trustee Program's directory places Colorado in Region 19, under Acting U.S. Trustee Gregory M. Garvin, at the Byron G. Rogers Federal Building, 1961 Stout Street, Suite 12-200. Region 19 also covers Utah, with an office in Salt Lake City, and Wyoming, which is "administered by the United States Trustee's office in Denver." The same office that reviews a Colorado debtor's operating reports reviews a Cheyenne debtor's.

Mediation in Denver is available and voluntary. L.B.R. 9019-2 provides that "The Court may refer a matter to mediation sua sponte, upon written stipulation, or upon motion by a party or the United States Trustee. Unless otherwise ordered by the Court, participation in mediation is voluntary." The rule gives a debtor and a funder a structured room in which to disagree. It does not require either one to enter it.

5. Colorado's Homestead Protects the Owner's House, Not the Company

For an owner who files a personal case, often because a guaranty made the company's debt the owner's debt, C.R.S. 38-41-201(1) exempts, in actual cash value above liens and encumbrances, "The sum of two hundred fifty thousand dollars if the homestead is occupied as a home by an owner or an owner's family," or "three hundred fifty thousand dollars" if the occupant owner, spouse, or dependent is elderly (sixty or older) or disabled. The text relied on here is current through January 1, 2025, and later amendments, if any, should be checked by counsel. An LLC has no homestead. Research for this page found no Colorado commercial financing disclosure statute of the California or New York type.

But a homestead figure is a question for an owner already on the way to a personal filing. Many are not. Delancey Street, which is not a law firm, offers a free and confidential review of merchant cash advance balances and the other obligations pressing on a business, to see whether a negotiated resolution is realistic before anyone reaches the Custom House. It files nothing, gives no legal advice, and involves independently licensed counsel where legal work is required. It claims no Colorado office. Some companies need the court, and should hear so without euphemism: a funder about to sweep the operating account, a landlord with a lease the business must shed, or a group of creditors that will not all agree on anything. Those companies belong with Denver bankruptcy counsel. The others have a choice about which room to disagree in.