Go for the "cannot handle the sudden riches" Option.
Means: they live above their standard, order loads of expensive goods they cannot pay. So they borrow Money, because everyone thinks he is the only one who buys something expensive, and there is that 1200g with which the debt will be covered but the Gold is used up.
Maybe the moneylenders are not of the nice Kind and demand that People go into slavery for a time to pay up, or they confiscate all the Food the peasants produce so they suffer hunger etc.
This plot is a bit tricky to put up and sound believable so you have to think things through upfront.
Means: they live above their standard, order loads of expensive goods they cannot pay. So they borrow Money, because everyone thinks he is the only one who buys something expensive, and there is that 1200g with which the debt will be covered but the Gold is used up.
Maybe the moneylenders are not of the nice Kind and demand that People go into slavery for a time to pay up, or they confiscate all the Food the peasants produce so they suffer hunger etc.
This plot is a bit tricky to put up and sound believable so you have to think things through upfront.