Debt Resulting from Fraud is Not Dischargeable in Bankruptcy
Post 5230
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Knowing Misappropriation and Conversion of Funds is Fraud
In re Matthew Jene Tubbs (Bankr. N.D. Tex., Fort Worth Div., No. 22-42728-MXM-7; Adv. No. 23-04019-mxm), October 15, 2025 .
Key Facts
Plaintiffs (Robles) and Defendant (Tubbs) met through their church; both held leadership roles. In Feb 2021 Robles home suffered major water damage from Winter Storm Uri and insurance paid $173,000.
In the Fall of 2021: Tubbs represented to Mr. Robles that he personally built a newer house and large barn on his parents’ property “with his own hands” (except foundation/insulation). That he had 10 years’ experience overseeing window/door installations at a major home-improvement chain, was a licensed contractor (false) and carried general contractor liability insurance.
Relying on these representations and Tubbs’s church handyman work, Robles hired Tubbs as general contractor for insurance repairs + upgrades, even though Tubbs had no prior general contracting experience.
The parties did not enter into a formal written contract. Instead, the parties jointly created a detailed budget Spreadsheet (labor + materials by room) and an 8–9 week timeline (later revised to end of Feb 2022).
Plaintiffs advanced $216,000 to Tubbs. Tubbs made almost no meaningful progress by August 2022 and was fired. Most items on the Spreadsheet never started. Flooring and kitchen cabinets he did start were defective and had to be redone. Tubbs failed to buy most materials despite having the funds and could not account for the money. Tubbs admitted on June 10, 2022: “I do not have the money to finish the project right now.” Tubbs admitted he used project funds for personal expenses (floor sander $5,000; personal credit-card bills $8,581).
Tubbs claimed he paid himself ~$78,000 as a legitimate GC/overhead fee ($10k/month). Court rejected this as not credible and unsupported by the Spreadsheet or timeline. Tubbs raised numerous defenses (undue influence by church authority, insurance fraud by plaintiffs, no binding contract, Tex. Prop. Code § 162.031(b) trust-fund defense, illegality, unclean hands, mistake, statute of frauds, etc.).
Legal Conclusions
§ 523(a)(2)(A) – False Pretenses / False Representation (nondischargeable)
Court found Tubbs made three material false representations that induced plaintiffs to hire him and advance funds:
He built the house and barn himself.
He was a licensed contractor.
He carried GC liability insurance.
The Court concluded that the Plaintiffs justifiably relied on these representations and rejected Tubbs’s “puffery” argument. The entire $152,610.05 debt was found to be nondischargeable on this ground alone (court did need to reach a finding of “actual fraud.)
§ 523(a)(6) – Willful and Malicious Injury (nondischargeable)
The statute requires deliberate/intentional injury (not just intentional act), or objective substantial certainty of harm + subjective motive, or intent to cause the actual injury.
Tubbs’s knowing misappropriation and conversion of at least $152,610.05 of project funds for personal use while knowingly leaving the job incomplete constituted willful and malicious injury to plaintiffs’ property.
Contract debts can be nondischargeable under § 523(a)(6) when the breach/conversion is intentional and harmful.
All of Tubbs’s Defenses Overruled
No undue church influence.
No insurance fraud or unclean hands by plaintiffs.
Valid oral contract existed (Spreadsheet + communications).
Tex. Prop. Code § 162.031(b) trust-fund defense inapplicable because the $78,000+ was not legitimately spent on the project or reasonable overhead/GC fee.
Conclusion
The bankruptcy court entered a nondischargeable judgment of $152,610.05 against debtor Matthew Tubbs in favor of the Robles, based on false representations that induced the contract and willful/malicious conversion of construction funds. Tubbs’s numerous defenses were rejected as not credible or legally unsupported.
Judgment for plaintiffs Felipe and Shereen Robles in the amount of $152,610.05, declared nondischargeable in Tubbs’s Chapter 7 bankruptcy under both 11 U.S.C. §§ 523(a)(2)(A) (false pretenses/representations) and 523(a)(6) (willful and malicious injury).
ZALMA OPINION
The availability of a great deal of insurance money creates a temptation to even honest church going people. Mr. Tubbs was tempted, lied about his abilities and took the insurance money designated to repair the home of Felipe and Shereen Robles and used it to pay off his ongoing debts and then filed bankruptcy hoping to avoid paying back what he owed. The bankruptcy court found that he defrauded the Robles’ and could not discharge that debt.
(c) 2025 Barry Zalma & ClaimSchool, Inc.
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Happy Law Day
ZIFL – Volume 30, Issue 9 – May 1, 2026
Read the full article at https://www.linkedin.com/pulse/zalmas-insurance-fraud-letter-may-1-2026-barry-zalma-esq-cfe-2tywc, see the video at at and at https://zalma.com/blog plus more than 5300 posts.
THE SOURCE FOR THE INSURANCE FRAUD PROFESSIONAL
ZIFL – Volume 30, Issue 9 – May 1, 2026
Zalma’s Insurance Fraud Letter (ZIFL) continues its 30th year of publication dedicated to those involved in reducing the effect of insurance fraud. ZIFL is published 24 times a year and is written by Barry Zalma.
DOJ Creates National Fraud Enforcement Division
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When Abalone Died As a Result of Multiple Causes The Efficient Proximate Cause Requires Payment
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Read the full article at https://www.linkedin.com/pulse/efficient-proximate-cause-doctrine-saves-claim-barry-zalma-esq-cfe-yndlc, see the video at and at and at https://zalma.com/blog plus more than 5300 posts.
In American Abalone Farms, LLC v. Star Insurance Company et al., H052643, California Court of Appeals, Sixth District (April 27, 2026) the Court of Appeals dealt with an insurance coverage issue that required application of the efficient proximate cause doctrine.
FACTS
American Abalone Farms, LLC ("American Abalone" ) operates an aquaculture farm in Santa Cruz County, California, raising abalone in tanks. In August 2020, the CZU Lightning Complex Fires led to a prolonged power outage and road closures near the farm. As a result, the farm’s water pumps failed, causing the death of most of the ...
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In United Services Automobile Association and State Farm Mutual Automobile Insurance Company v. Anthony Wenzell, 2026 CO 25 (Colo. Apr. 27, 2026) Anthony Wenzell was rear-ended in a car accident. He had a significant prior 2014 accident that required back surgery.
Wenzell claimed underinsured-motorist (UIM) benefits under three policies: (1) the tortfeasor’s liability policy, (2) his own primary UIM policy with State Farm, and (3) an excess UIM policy issued by USAA (under his brother’s policy, which contained an “other insurance” clause making USAA’s coverage excess over any collectible insurance).
After receiving the claims, both USAA and State Farm repeatedly requested that Wenzell execute comprehensive medical-release authorizations so they could obtain his full medical records and ...
It is Fraud to Make the Same Claim Twice
Read the full article at https://www.linkedin.com/pulse/fraud-make-same-claim-twice-barry-zalma-esq-cfe-c4g8c and at https://zalma.com/blog.
Chutzpah: After Being Paid for a New Roof Insured Makes Second Claim For Same Damages
Post number 5347
No One is Entitled to be Paid for the Same Loss Twice
In Mohammed Ali Khalili v. State Farm Lloyds, No. 14-25-00611-CV, Court of Appeals of Texas (April 30, 2026) Khalili maintained a State Farm Lloyds homeowners insurance policy for decades. In 2008 he filed a roof-damage claim; State Farm paid him to replace the entire roof (shingles and gutters). Khalili never replaced the roof and repeated his claim.
BACKGROUND
In 2021 he filed a second roof claim. State Farm’s inspectors found the roof “very old” with extensive non-storm-related damage. The claim was denied because (1) the damage did not exceed the deductible and (2) State Farm had already paid for a full roof replacement.
PROCEDURAL HISTORY
State Farm filed motion for summary...
It is Fraud to Make the Same Claim Twice
Read the full article at https://www.linkedin.com/pulse/fraud-make-same-claim-twice-barry-zalma-esq-cfe-c4g8c and at https://zalma.com/blog.
Chutzpah: After Being Paid for a New Roof Insured Makes Second Claim For Same Damages
Post number 5347
No One is Entitled to be Paid for the Same Loss Twice
In Mohammed Ali Khalili v. State Farm Lloyds, No. 14-25-00611-CV, Court of Appeals of Texas (April 30, 2026) Khalili maintained a State Farm Lloyds homeowners insurance policy for decades. In 2008 he filed a roof-damage claim; State Farm paid him to replace the entire roof (shingles and gutters). Khalili never replaced the roof and repeated his claim.
BACKGROUND
In 2021 he filed a second roof claim. State Farm’s inspectors found the roof “very old” with extensive non-storm-related damage. The claim was denied because (1) the damage did not exceed the deductible and (2) State Farm had already paid for a full roof replacement.
PROCEDURAL HISTORY
State Farm filed motion for summary...
What Must be Done after Notice of a Claim is Received by the Insurer
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A first party property policy does not insure property: it insures a person, partnership, corporation or other entity against the risk of loss of the property. Before an insured can make a claim for indemnity under a policy of first party property insurance the insured must prove that there was damage to property the risk of loss of which was insured by the policy. The obligation imposed on the insured ...