There’s little difficulty in defining this common word — a person declared in law to be unable to pay his or her debts. What’s odd about it is its etymology. You might connect the first part with a financial institution, and the second part with rupture. So could it refer to a person forcibly torn from the embrace of his bank? It has a weird kind of sense about it, and actually it’s not so far from the truth.
The word actually comes from Italian banca rotta, a broken bench (not a rotten one, as the false friend of Italian rotta might suggest — it’s from Latin rumpere, to break). The bench was a literal one, however: it was the usual Italian word for a money dealer’s table (and indeed is the origin of our bank for a financial institution and also for the sense of break in phrases like “He’s gone broke”). In his dictionary, the great Dr Johnson retold the legend that when an Italian money trader became insolvent, his table was broken. But the Italian word was being used figuratively — it could also mean “shipwrecked” or “defeated”, for example.
Bankrupt arrived in English around the middle of the sixteenth century via the equivalent French form of banqueroute. It was changed into our modern form because people linked the second half with medieval Latin ruptus, broken, from the verb rumpere. That root also turns up in abrupt, corrupt, interrupt ... and rupture.