Last Friday, Denver developer Ben Hrouda filed a personal Chapter 11 petition listing roughly $155 million in liabilities against about $3 million in assets. That kind of imbalance would give any developer heartburn, and the filing lands just as lenders press claims against his firm, Flywheel Capital, and a southside self-storage property tied to his deals has been placed under court control.
Hrouda is the founder and managing partner of Flywheel Capital, according to Flywheel Capital. His split with former co-owner Adam Hazlett has fueled years of litigation and buyout fights, as shown in court dockets such as Hazlett v. Hrouda, per Justia. Those disputes, plus a string of defaulted loans and withdrawn foreclosures, form the legal backdrop to the bankruptcy move now on the table.
Hrouda’s personal schedules, filed Feb. 6, list about $155 million in total debt and $3 million in assets, and show he personally guaranteed roughly $148 million in loans, according to BusinessDen. The filing also lists about $1 million owed to the IRS and roughly $200,000 in state tax liabilities, and it notes that tax authorities have begun garnishing wages and freezing accounts. One lender, Central Trust Bank, has sued over a $5.8 million loan tied to Broadway Station Self Storage at 1475 S. Acoma St.; a judge appointed a receiver, and a Lone Tree firm is operating the facility while a foreclosure proceeds, the outlet reported.
Legal implications
Under Colorado law, a court-appointed receiver can be granted wide authority to manage property, collect rents, and pay operating expenses while litigation plays out, with the court’s order defining exactly how far that power goes, according to the Colorado Revised Statutes. At the federal level, a Chapter 11 filing typically triggers an automatic stay that pauses most collection efforts so a debtor can try to reorganize, although secured creditors can ask a bankruptcy judge to lift the stay and allow a foreclosure to move forward, per the U.S. Courts. Because Hrouda personally guaranteed such a large chunk of debt, the Chapter 11 case could complicate the timing of foreclosures and give him a legal route to renegotiate or sell assets under court supervision.
What’s next for Flywheel and lenders
An arbitrator recently set the buyout price for Hazlett’s stake at about $5.6 million, and Judge Stephanie Scoville previously ordered Hrouda to pay Hazlett roughly $780,000 after finding he had taken company funds, adding yet another layer of pressure on Hrouda as the bankruptcy proceeds, as BusinessDen reported. Creditors will now decide whether to push motions to lift the stay, advance foreclosures, or pursue sales through receivership while Hrouda works to settle claims in bankruptcy. The coming weeks are likely to bring a much sharper focus to the fate of Flywheel’s projects and how much lenders ultimately recover.
