Can't redeem Xbox Live GOLD gift card because if overdue balance

You can try contacting support to see if they can cancel the subscription. http;//support.xbox.com/contact-us I think it will also just drop off on its own after a certain
amount of time (2-3 months I think). Otherwise, yes, you would need to pay off the balance before you can use the card.

Also, if you do pay off the subscription or somehow get the Ultimate subscription back before you add the Gold card, the Gold card will be converted to Ultimate. If you only want Gold and want the full amount of time on the Gold card, the Ultimate subscription
would need to end before you add the card.

So? Does that mean i'll never be able to redeem the card until I pay for it with credit/debit

Even paying with your account balance, when you purchased Gold/Game Pass/Ultimate it starts a recurring subscription. It's up to you to either keep enough funds or another payment method on your account to keep the subscription going or turn off auto-renewal
so it will just end. Once it is overdue, you can only pay off the balance with a credit card/Paypal. A prepaid card cannot be added until the balance is paid because you have a "delinquent" account.

Prepaid cards cannot be used until an overdue balance is paid and overdue balances cannot be paid with Xbox gift cards. So that would not work in this situation.

you can't pay for Xbox Live Gold with a Microsoft balance, the only way to pay for it is by credit card, paypal, and a actual Xbox Gold Gift Card that is only for Gold Subscription