I know that this is not what you want to hear, it is distressing enough having to cancel your holiday without the threat of court action. That does seem rather insensitive and premature. Unfortunately you may be liable for this amount.
In my experience with low deposit bookings, there is usually a clause stating that the balance of the full deposit must be paid by a later date or if the holiday is subsequently cancelled.
There is also usually a sliding scale for cancellation charges - the closer to the holiday you cancel the more you have to pay. Your holiday booking is a contract and these charges are written in to it. The applicable legislation and industry standards always seem to be on the tour operator's side in these situations.
Check your holiday insurance and see if the circumstances which have caused you to cancel are covered by your policy. If they are you might have to pay the money out then claim it back from your insurance but at least you would get it back.
If the circumstances are not covered, if it's a travel agent you are dealing with try contacting the tour operator direct. If you're already dealing with the tour operator ask to speak to someone senior to whoever answers the phone. If you do have to pay this amount they might accept an installment arrangement. You could also try contacting your local Citizens' Advice Bureau or ABTA.
I am so sorry you are in this situation and that I cannot be more help.