A costume made up of clothing that was purchased or found in your closet. Involves little to no alteration of the clothing.
My Tifa costume was completely closet cosplay, but I made the armor myself.
A cosplay made entirely out of the clothes found in your closet, which means it requires minimal effort and is bound to be shitty.
You: What the hell? Who's that girl supposed to be?
Your knowledgeable friend: Didn't you see the death note? She's a fucking closet cosplay Misa.