Green’s Dictionary of Slang

1. (US gang) retreated from a confrontation [one lacks SE backbone].

1992		M.S. Dunton Street Signs 96: Boned Out: Quit; chickens out.
1995		R.D. Flores Gang Slanging n.p.: Boned Out [...] Quit, chicken out or left.
2002		Curtis High School (University Place, OR) ‘Gang Street Lang.’ n.p.: Boned Out Quit/chickens out, left, backed down.

2. see under bone v.²