La Casa de la Raza Files for Bankruptcy

Seeking to reorganize mounting debt and avoid yet another looming foreclosure, the board of directors of longtime Lower Eastside community center La Casa de la Raza filed for bankruptcy on Wednesday.

In September of last year, Santa Barbara attorney and original La Casa cofounder Tomas Castelo purchased the community center’s loan note from Fidelity Mortgage Lenders, which had threatened foreclosure last summer after La Casa failed to make numerous payments.

Castelo said he attempted to work with the board to make the nonprofit more fiscally responsible but was met with resistance, especially when he asked that the board open up its bookkeeping records and reveal any silent lenders who may have helped La Casa in the past.

“[The bankruptcy] can actually be an advantage to the community,” Castelo stated in an email, “in that it will require that the board submit the detailed financial information that we have been trying to obtain all along in order to properly evaluate the true extent of their financial distress and other impediments to their fiscal revival.”

Castelo’s recent move toward foreclosure and public auction of La Casa’s 26,000-square-foot multipurpose building, located at 601 E. Montecito St, was called a “hostile takeover” in a press release sent out by La Casa’s attorney, Matt Clarke. “The property is worth a great deal more than the face value of the loan,” he added. “In essence, this lender [Castelo] is attempting to seize a landmark historic institution in our community for a tiny purchase price.“

Castelo said La Casa now owes him upward of $600,000. He added that the bankruptcy court could allow La Casa’s “major assets to come under the control of a more fiscally responsible entity that would . . . promote [its] mission statement [and] the self-sufficiency of the building as an asset for the entire community instead of the small group that currently controls it primarily for their own benefit.”

In the meantime, the bankruptcy filing “will not affect programming, and direct services offered through [La Casa] will continue,” Clarke said.