What happens to my indemnity claim if the seller has already spent all the sale proceeds?

Your contractual right to make the claim does not disappear, but your practical ability to collect on it can be seriously undermined. An indemnity is only as valuable as the paying party's ability to actually pay, and if a seller has spent the sale proceeds and has few other assets, a buyer can win a valid indemnity claim on paper and still struggle to recover the money through ordinary collection or enforcement steps.

This exact risk is why experienced buyers build collectability protections into the deal from the outset rather than relying solely on the seller's promise to pay later. A holdback or escrow, where part of the price is retained or held by a third party for a defined period after closing, gives the buyer a fund to draw from directly instead of having to chase the seller afterward. Representations and warranties insurance is another tool some buyers use for the same reason. If a claim has already arisen and the seller appears to have limited means, a buyer should get advice quickly on realistic recovery options, including whether any security or holdback still exists.