Does my indemnity claim survive if the seller personally goes bankrupt after closing?

The claim itself generally survives as a legal right, but its practical value can be sharply reduced. If a seller who personally guaranteed obligations, or who owes an indemnity directly, later enters personal bankruptcy under the federal Bankruptcy and Insolvency Act, an ordinary unsecured indemnity claim typically becomes a claim provable in that bankruptcy, meaning the buyer stands alongside the seller's other unsecured creditors rather than being paid ahead of them, and is also subject to an automatic stay of proceedings that generally pauses new or ongoing lawsuits against the bankrupt individual.

Depending on how the bankruptcy plays out, the buyer may ultimately recover only a portion, or in some cases very little, of what is owed, and the seller's eventual discharge from bankruptcy can release them from further personal liability on many unsecured debts going forward. This is exactly the collectability risk that leads buyers to insist on tools that do not depend on the seller's ongoing solvency, such as a holdback, escrow, or representations and warranties insurance, negotiated at the time of the original purchase rather than relied on only after a problem surfaces.