Close pal's terrible failure (8)
I believe the answer is:
collapse
'failure' is the definition.
(thesaurus)
'close pal's terrible' is the wordplay.
'terrible' is an anagram indicator.
'close'+'pal'='closepal'
'closepal' with letters rearranged gives 'COLLAPSE'.
(Other definitions for collapse that I've seen before include "Sudden breakdown" , "Slump" , "Founder" , "Sudden fall" , "Break down - fall" .)