Bankruptcy is a legal status whereby a person or entity such as an organization is formally declared unable to repay their debts to creditors. They are legally insolvent. In a jurisdiction, bankruptcy is declared by a court order which is usually initiated by the debtor.

If your ship gets destroyed then your Pilots Insurance allows you to rebuy your old ship and loadout at a reduced cost or take a basic Sidewinder for free.

Criminals such as Pirates who are transferred to a Detention Centre, must pay off their fines and bounties. If they cannot afford it then they lose their old ship and get a Sidewinder for free.

If you can't pay or use a ship as collateral then you can take a loan or you go bankrupt.