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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Insurer’s Exclusion for Claims of Assault & Battery is Effective
Post 5250
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Bar Fight With Security is an Excluded Assault & Battery
In The Cincinnati Specialty Underwriters Insurance Company v. Mainline Private Security, LLC, et al., Civil Action No. 24-3871, United States District Court, E.D. Pennsylvania (December 16, 2025) two violent attacks occurred in Philadelphia involving young men, Eric Pope (who died) and Rishabh Abhyankar (who suffered catastrophic injuries). Both incidents involved security guards provided by Mainline Private Security, LLC (“Mainline”) at local bars. The estates of the victims sued the attackers, the bars, and Mainline for negligence and assault/battery. The insurer exhausted a special limit and then denied defense or indemnity to Mainline Private Security.
INSURANCE COVERAGE
Mainline had purchased a commercial ...
Marine Insurer May Dispose of Vessel to Avoid Waste
Post 5249
Read the full article at https://lnkd.in/gfn_UHdp, see the video at https://lnkd.in/gDWVccnr and at https://lnkd.in/gv9nsBqk, and https://zalma.com/blog plus more than 5200 posts.
In Western World Insurance Company v. The Estate Of Shawn Arsenault, No. 25-cv-13413-PGL, United States District Court, D. Massachusetts (December 17, 2025) the USDC was asked to resolve a marine insurance dispute after the sinking of the F/V Seahorse, a commercial fishing vessel, off Cape Cod on June 8, 2025. The vessel’s owner and operator, Shawn Arsenault, died in the incident.
Western World Insurance Company issued a hull insurance policy for the vessel. With no personal representative yet appointed for the estate, the insurer cannot determine the proper payee for the insurance proceeds.
The insurer paid for the vessel’s recovery and removal, and the vessel is now with a salvage company, incurring substantial storage fees. The insurer determined the loss is covered under the ...
Marine Insurer May Dispose of Vessel to Avoid Waste
Post 5249
Read the full article at https://lnkd.in/gfn_UHdp, see the video at https://lnkd.in/gDWVccnr and at https://lnkd.in/gv9nsBqk, and https://zalma.com/blog plus more than 5200 posts.
In Western World Insurance Company v. The Estate Of Shawn Arsenault, No. 25-cv-13413-PGL, United States District Court, D. Massachusetts (December 17, 2025) the USDC was asked to resolve a marine insurance dispute after the sinking of the F/V Seahorse, a commercial fishing vessel, off Cape Cod on June 8, 2025. The vessel’s owner and operator, Shawn Arsenault, died in the incident.
Western World Insurance Company issued a hull insurance policy for the vessel. With no personal representative yet appointed for the estate, the insurer cannot determine the proper payee for the insurance proceeds.
The insurer paid for the vessel’s recovery and removal, and the vessel is now with a salvage company, incurring substantial storage fees. The insurer determined the loss is covered under the ...
Lack of Jurisdiction Defeats Suit for Defamation
Post 5250
Posted on December 29, 2025 by Barry Zalma
See the video at and at
He Who Represents Himself in a Lawsuit has a Fool for a Client
In Pankaj Merchia v. United Healthcare Services, Inc., Civil Action No. 24-2700 (RC), United States District Court, District of Columbia (December 22, 2025)
FACTUAL BACKGROUND
Parties & Claims:
The plaintiff, Pankaj Merchia, is a physician, scientist, engineer, and entrepreneur, proceeding pro se. Merchia sued United Healthcare Services, Inc., a Minnesota-based medical insurance company, for defamation and related claims. The core allegation is that United Healthcare falsely accused Merchia of healthcare fraud, which led to his indictment and arrest in Massachusetts, causing reputational and business harm in the District of Columbia and nationwide.
Underlying Events:
The alleged defamation occurred when United ...
Zalma’s Insurance Fraud Letter
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ZIFL Volume 29, Issue 24
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Zalma’s Insurance Fraud Letter (ZIFL) continues its 29th year of publication dedicated to those involved in reducing the effect of insurance fraud. ZIFL is published 24 times a year by ClaimSchool and is written by Barry Zalma. It is provided FREE to anyone who visits the site at http://zalma.com/zalmas-insurance-fraud-letter-2/
Zalma’s Insurance Fraud Letter
Merry Christmas & Happy Hannukah
Read the following Articles from the December 15, 2025 issue:
Read the full 19 page issue of ZIFL at ...
The Professional Claims Handler
Post 5219
Posted on October 31, 2025 by Barry Zalma
An Insurance claims professionals should be a person who:
Can read and understand the insurance policies issued by the insurer.
Understands the promises made by the policy.
Understand their obligation, as an insurer’s claims staff, to fulfill the promises made.
Are competent investigators.
Have empathy and recognize the difference between empathy and sympathy.
Understand medicine relating to traumatic injuries and are sufficiently versed in tort law to deal with lawyers as equals.
Understand how to repair damage to real and personal property and the value of the repairs or the property.
Understand how to negotiate a fair and reasonable settlement with the insured that is fair and reasonable to both the insured and the insurer.
How to Create Claims Professionals
To avoid fraudulent claims, claims of breach of contract, bad faith, punitive damages, unresolved losses, and to make a profit, insurers ...
