Sections of Texas Bankruptcy Code
Property 42.001(b)
Under Texas bankruptcy law, earned but unpaid wages are completely exempt from seizure by creditors after you file for Chapter 7 or Chapter 13 bankruptcy. What that means is that if you are working as an employee and have earned money for the week, month etc.; but have not been paid yet, that money cannot be seized by creditors while in bankruptcy.
A debtor must be a W2 employee to benefit from this Texas bankruptcy exemption. Employees or contractors who are considered independent and use a 1099 form for taxes do not have access to this exemption. However, 1099 employees' and contractors' wages may be treated as commission under the Texas bankruptcy code. The Texas bankruptcy exemption states that up to 75% of unpaid commissions are exempt from seizure by creditors. But the total amount of exempted commissions cannot exceed 25% of the exemption limits ($30,000 for an individual or $60,000 for a head of household) for those filing for bankruptcy.
For example: If a debtor is working as a telemarketer making $300 a week, up to $225 may be exempt from seizure by creditors in a Chapter 7 or Chapter 13 bankruptcy.
If the debtor filing for bankruptcy is considered low-income a judge may be willing to increase the percentage of exempted commissions.