Disbanding is an event that ends the existence of a Unit, the equivalent of unpopping for living units. The unit disappears without a trace, along with any non-magical equipment it may be wearing. Items not worn by the disbanded unit, magic items, and artifacts, are left behind.
A unit may be disbanded when:
- the Ruler chooses to disband the unit.Erf-b1-p072 This is instantaneous and permanent.  It may be applied to any unit controlled by the ruler, wherever that unit is located. 
- the unit is in the field when its ruler croaks without an heir.Erf-b1-p098b
- the unit, while under a Loyalty spell, refuses an order or otherwise acts in a disloyal manner.Erf-b1-p084a
- the unit's Ruler is unable to pay its upkeep cost, or a Barbarian unit is unable to pay its own cost.
 Proposed Canon
"Disband" is used by the members of Erfworld as a curse word, somewhat akin to "damn" or "be damned". Examples include "Titans disband" in the Book 2 Text Update 6.
Barbarian Warlords (and presumably Natural Ally Chiefs and Rulers of sides, as well) can set a predetermined Disbanding Order. This ensures that in the event of bankruptcy, the units lost due to unpaid upkeep are not random; low-priority or trouble units disband first rather than valuable or preferred units, those can be kept safe at the far end of the list.