How do I make it stop the animation when it is unequipped?

It's extremely simple, make it so the animTrack can be accessed across more than one function. We do this by declaring it outside the function onActivate(). Then we create a function to get when the tool is unequipped. Then we use :Stop() on animTrack.

All together now

local animation = Instance.new('Animation')
local debounce = false
local animTrack

function onEquip()
   script.Parent.Handle.UnsheathSound:Play()
end

function onActivate()
    if not debounce then
        debounce = true
        script.Parent.Handle.SlashSound:Play()
        animation.AnimationId = "http://www.roblox.com/asset/?id=129967390"
        local player = game.Players.LocalPlayer.Character
        animTrack = player.Humanoid:LoadAnimation(animation)
        animTrack:Play()
        script.Parent.Handle.Script.Disabled = false
        wait(0.5)
        animTrack:Stop()
        script.Parent.Handle.Script.Disabled = true
        wait(0.5)
        debounce = false
    end
end

function onUnequip()
    animTrack:Stop()
end

script.Parent.Equipped:connect(onEquip)
script.Parent.Unequipped:connect(onUnequip)
script.Parent.Activated:connect(onActivate)

Hope this helps you.