SJ Councilwoman Files for 2nd Bankruptcy to Save Family Home

San Jose Councilwoman Magdalena Carrasco—who’s running in the March 3 primary to replace terming-out Santa Clara County Supervisor Dave Cortese—filed for personal bankruptcy protection in 2019 to prevent lenders from repossessing her family home.

Last year’s Chapter 13 petition marked the second time Carrasco sought bankruptcy relief since 2005, when she turned to the courts to start digging her way out of debt she accumulated by quitting her job to become a full-time caregiver for her sick parents.

The District 5 council rep said the decision to file for bankruptcy again had nothing to do with her personal financial stewardship. Rather, she felt backed into a corner after inheriting a South San Jose house from her mother when she died of cancer in 2018.

“Unfortunately, I also inherited her mortgage,” Carrasco explained.

About a decade-and-a-half ago, she said her parents took out a loan to remodel the house—where Carrasco spent some of her formative years—and to make it more accessible for her father, who suffered from Alzheimer’s. Her parents went through a company called Specialized Lending Service (SLS), which Carrasco called “an unscrupulous lender.”

“If you look at reviews from Consumer Affairs and the Better Business Bureau, SLS has a terrible reputation for preying on elderly people—hoping to be able to make a profit by seizing their homes through foreclosure,” she said.

Carrasco tried transferring the loan to her own name after her mom died, but the lender refused and threatened to foreclose on her deceased parents’ property.

“I cannot allow that to happen,” she said. “As a single mother of four, my children may never be able to afford to buy a home in San Jose. I want my childhood home to remain in the family for their future.”

After seeking legal advice, Carrasco said she realized that Chapter 13 bankruptcy was the most feasible way to avoid foreclosure. She said the court-ordered repayment plan finalized at the end of last year will allow her to negotiate a new mortgage to pay off the predatory loan and keep her childhood home in the family.

“I am not asking the court to forgive any debt,” the East Side councilwoman insisted. “I have not mismanaged my personal finances in any way. I will still be responsible for the whole amount my parents owed, but I will now have the time to make sure SLS doesn’t try to steal my children’s future.”

According to the bankruptcy petition filed May 23, 2019, in San Jose’s federal court, Carrasco estimated her assets as up to $984,988 and liabilities as $431,084.

Chapter 13, also known as a wage-earner’s plan, allows a debtor with steady income to emerge from bankruptcy by coming up with an agreement to pay creditors within a three-to-five-year timeframe. Under the repayment plan Carrasco finalized Dec. 2, she agreed to cough up $441,109 to a handful of creditors within 60 months.

Most of what’s owed—$431,084 and some change—goes to Specialized Loan Servicing to pay down the remaining balance of the $949,448 mortgage on her late mother’s home. Another $8,200 covers back taxes. The rest, just $1,825, gets divvied up among a pest control company, two credit cards and a Direct TV bill that got sent to collections.

In 2010, Carrasco’s first bankruptcy made headlines because of her run as a business-backed candidate against then-District 5 Councilman Xavier Campos.

In a Sept. 18, 2010, article in the Mercury News, Carrasco acknowledged the public’s interest in her financial history. At the time, the council hopeful—herself an only child—told the Merc that she filed for Chapter 13 bankruptcy in 2005 after being overwhelmed by bills when her elderly parents fell ill.

In 2002, Carrasco quit her job as a Santa Clara County social worker to take care of her aging parents. A few years later, her father died. She filed for bankruptcy soon after.

Records show Carrasco exited that initial bankruptcy within a year-and-a-half, selling her townhouse and moving in with her mom to pay down credit cards and other debt.

“It was almost like a perfect storm with my work, struggling with my parents, my children,” Carrasco told the Merc in 2010. “We needed to restructure our debt. Morally, it was the only thing I could do to make sure my parents were OK.”

In 2018, Carrasco’s mother passed away after a prolonged battle with cancer. The councilwoman filed for her second bankruptcy just months later.

According to her 2019 bankruptcy filings, Carrasco now takes home just over $100,000 a year as San Jose’s D5 council rep. But nearly $7,200 of her monthly income goes toward rent and other vital expenses.

Carrasco is juggling her day job at City Hall while competing against patent attorney Otto Lee, Assemblyman Kansen Chu (D-San Jose) and software developer John Leyba in next month’s election for the county’s District 3 seat. The five-member Santa Clara County Board of Supervisors oversees 22,000 public employees in more than 70 departments that operate on a combined annual budget of about $7 billion.

Jennifer Wadsworth is the former news editor for San Jose Inside and Metro Silicon Valley. Follow her on Twitter at @jennwadsworth.


  1. By all accounts Carrasco is an irresponsible deadbeat. Carrasco’s virtuous claims might have some credence had she paid off the credit cards and Direct TV debts. Those don’t appear to be related to her parents situation.

    Direct TV is a luxury and costs somewhere between $60 to $135 / month depending on package options. There are significantly cheaper alternatives.

    Then there’s the math. indicates that the $125K council salary leaves $6,904 in monthly take-home pay – insufficient to cover the claimed $7,200 in monthly expenses.

    Then there’s the matter of child support from ex-Kevin De Leon. Presumably, she’s receiving it for any children under 18.

    Then there’s the failure to file income taxes for 7 years (1998-2004) that surfaced in her previous bankruptcy. Typically, a Chapter 13 bankruptcy reduces the overall debt through a negotiated settlement. This allows Carrasco to transfer her debt to everyone else that pays their bills by raising creditor costs.

    Why should voters support her for managing public money since she repeatedly mismanages her own?

  2. Multiple bankruptcies then talks down to landlords who not only pay their own mortgage, carry a much larger one than their own house.

  3. Sad story. Too many others living it every day. America is a pretty unforgiving place. Unless you’re Trump.

    • > Sad story. Too many others living it every day. America is a pretty unforgiving place. Unless you’re Trump.

      Are you saying you’re going to help out Magdalena, or are you just saying that someone else should help her out?

      Maybe Bloomberg can help her out. He’s a billionaire and a Democrat. He cares a lot for people like Maggie.

    • Some one is forgiving Trump? Certainly isn’t any one from MSDNC, the Commi News Network or the New York Slimes.

      Noble of the lady to take care of her parents, I had a similar situation, renting out my parents house while they lingered saved the estate, and we didn’t barrow money from unscrupulous lenders for things we could not afford as we has seen many of our friend do over the years.

      I’m guessing the government hasn’t learned that lesson as they seem to think we have unlimited money to give them for run away spending to keep them elected.

  4. San José’s District 5 has been a perennial bastion of seditious activity for decades, referencing sanctuary for illegal aliens, anti-San José Police sentiments, ineffective and incompetent leadership.

    Magdalena only compounded District 5’s problems.

    On the bright side, the taxpayers are looking at a “Two-fer.”

    Cortese finally gets the “termed-out” boot from District 3 in the County and Magdalena’s political career is also almost over.

    I say “almost over” for there may be economic salvation for Magdalena.

    Should Magdalena figure out a way to convince all the illegal-aliens she protected over the years from deportation, to cough-up a measly $5 bucks apiece, she’ll be out of debt and flushed with cash in record time.

    Kansen Chu is the most likely victor in the District 3 race.

    David S. Wall

  5. > “Unfortunately, I also inherited her mortgage,” Carrasco explained.

    This doesn’t make sense on the face of it.

    If she “inherited” a mortgage, presumably the amount of the mortgage and payments have been fixed.

    But housing prices have been going up, up, up and the equity in the home has been increasing (IF she were making the payments).

    It’s not clear that “inheriting a mortgage” is a bad thing if you inherit an appreciating property along with it.

    • One would assume that inheritance of a home–even with a mortgage is a lucky break. She won’t owe federal or state tax on appreciation it because the cost basis will “step-up”, while the for property tax purposes she’ll keep her parent’s original cost basis–best of both world really. I doesn’t make sense to me to sell and then do what? Get a rental? How is that going to work out long term? I feel for her and the situation she endured with her parents, but having the four children (is she getting child support?) in a marriage that didn’t work out is obviously her biggest eight-ball. Nothing to say really except one needs to be very thoughtful about the wisdom of having additional children and how that could affect your financial future if things don’t work out.

    • Of course there is no personal liability on the mortgage, but the lien is still on the property. The lender will foreclose if payments aren’t made despite granny’s passing and they will throw Magdalena out of the house.

    • Yes, hadn’t considered that aspect. Her $435K mortgage costs about $2,000 / month at current interest rates. As you point out, mortgages aren’t inherited. Presumably she could refi at 3.7% APR for a 30 year fixed even with the previous BK. Monthly payments would be less with a balloon mortgage. Presumably the children are all adults and able to contribute since she claims the house will be for their benefit.

      Well, maybe not the illegitimate daughter with Kevin de Leon.ón#Personal_life – unclear her other kids know their daddy.

      The pity me ‘single mom, caring for ill parents, and victimized by a predatory lender’ claim seems dubious. Even tossing in car payments, gas, food, etc., it’s difficult to see how her net income, that far exceeds many in the valley, isn’t ample had she acted like her responsible constituents.

  6. Omg..I can’t believe some responses -She had to quit her job to care for sick dying parents and had to remodel to accommodate for their needs. That’s dedication to family values.

    • So sorry but there are so many untruths to this story; 1, she was NOT a single mother, just recently became; her ex husband was the caregiver of both her parents day and night, she is getting child support from him; Kevin is not the father to her younger children, they have a very loving and responsible father, he was just booted out

  7. So is she living in this “South San Jose” house (outside of her district….again)? Or is she renting it and receiving an income on the property to help cover the cost? OR is she keeping the house vacant during a housing crisis?

    Maybe she can rent it *affordably* and start to understand the issues faced by many landlords?

    Also. What is she doing with 7 grand in monthly debt?! Shes enjoying life a lot more than the rest of us with that kinda expenses.

    • Neighbors confirm people living in the house, so Carrasco not listing rental income. Why?

      A federal form cannot be filled with lies. Ask Roger Stone.

  8. My deepest condolences to Ms. Carrasco in the deaths of her parents.

    It sounds as if her parents did a reverse mortgage. We build equity in our homes. If we need it to pay medical bills or even higher property taxes, we can take equity out of our home. They may have been the best choice for the parents. No doubt that info was shared with Ms. Carrasco, an only child (?), before they did the paperwork.

    Ms. Carrasco should sell the house, get out of debt, and move on.

    Mr. Carrasco, you are supportive of the passage of Measure E, but it will come back to bite you and your children. Either you don’t fully understand the full ramifications of Measure E or don’t understand finances.

    Since you have multiple bankruptcies, failed to file taxes for multiple years, etc., we won’t be voting for you as a State representative in any capacity. We need someone who understands taxes and accounting principles. You aren’t that person.

  9. Oh wow! Another sob story from a SJ lawmaker! Don’t believe this crap…she’s not keeping the house so that her children could one day live in it…she’s keeping the house because she knows the value is going to sky rocket once Google moves in and wants to sell it at the highest price possible and profit for her retirement. How can a house that she grew up in have a mortgage of $949,448 in the that area? She’s no spring chicken. Her explanation reeks of financial irresponsibility and victim mentality.

  10. Carrasco did try to help her parents, and she does care about working people.

    However, she has been a hopelessly self centered and disorganized politician her entire life. Her “marriage” to Kevin DeLeion, one of the most corrupt politicians in the history of the state demonstrates her lack of judgement and honesty. Carrasco is the queen of political freebies. It is a sad fact that she is declaring bankruptcy. She does not deserve this misfortune. But Carrasco is incapable of being a trustee of the people’s business. She cannot be respected or trusted at all.

  11. Bankruptcy filings wipe out the retirement savings of many people. It was a promise to pay a debt. What happened to the money? and this is her second time through. Some people like Trump use bankruptcy as a business tool. It encourages cheaters.
    Hopefully, the Bankruptcy Court Judge will rule appropriately.
    Sell the house and move on.

  12. Carrasco through her campaign still owes John Shallman over 25 grand. She also has other property listings that she failed to document. 7 years of non tax filing.




    So we have NO idea of what money she has.


    She has debts for state income tax

    County tax

    Income from DeLeon

    The trustee needs to be told this.

    • TRINI LOPEZ, WOW!!! That is quite a list!! Every time I see her now I will think of that list.

      How is she get away with still owing on a past campaign???

      Every Council person is supposed to (by law) submit a list of the donors by the end of March of each year (I think it’s March). It would be interesting to see her list.

      • > Every Council person is supposed to (by law) submit a list of the donors by the end of March of each year (I think it’s March). It would be interesting to see her list.

        This is the twenty-first century. It is technically feasible for the lists of donors to be made available on the internet.

        Am I the first person in Silicon Valley to think of this?

      • Donor Reuben Kihuen resigned from Congress for sexual misconduct.

        Kevin DeLeon who trademarked legislative groping

        Two guys who are guilty of extorting Carlos Slim.

  13. Saving a home? That’s a privilege many don’t have here. A lot of people, especially young people, can’t even afford a home to begin with – despite working hard. This is due to policies that have driven housing costs to exorbitant levels.

  14. It must be recognized that settling differences with others requires humility and flexibility on both sides ,, sometimes we don’t know peoples troubles ,, circumstances we are quick to judge harshly leave it in Gods hands trusting that he will handle it in his own time and his own way ,,,,, love more hate lesss what we say resécala how we feel about people ???

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