When an individual or an organisation is unable to keep the promises made to repay the borrowed money or the money owed to other people, they are in a state of bankruptcy.

This usually occurs when the amount borrowed is larger than the assets one owns to be able to repay the debt. It is also a classic case of bad financial planning.

Example:
For example, if a company made a risky investment and lost most of its money and is unable to pay its employees or the money they took as a loan/debt from other organisations/people, they go bankrupt.