Anthony Price, 58, retired from the prison service last June for health reasons and had agreed a compensation payment because he was unable to continue working there because of his condition.
However, despite multiple calls to Capita, waiting on hold for more than four hours, he has still not received the money.
Anthony, from St Helens, told the BBC he had been forced to borrow money from family to cover his rent and bills.
With his wife also unwell, Anthony said the issue had caused them a huge amount of stress and was affecting his mental health.
“I’ve not been able to cope. It’s keeping me awake,” he said.
“Christmas and New Year were cancelled – we couldn’t do anything.”
After his MP intervened in his case, Anthony was told he would be paid within five days.
But he fears if he has to wait any longer he will not be able to pay his rent and could lose his home.
Anthony said the offer of an interest-free loan from government was “too little, too late” as he had already been forced to borrow money for January and February.
“It’s so embarrassing,” he said. “I shouldn’t be feeling like this.”