You clear diskspace on Catalina same as you would on other Mac Systems. You need to move or remove some of the software on your disk drive. If you don't have another backup disk connected then maybe you can remove apps you bought from App Store and load them back after you get your system loaded.
You can run
df -h from the command line and see what percent full your drive is. If you have about 50 GB free that is 20% of your 250 GB drive so your drive should be only 80%.
You can set up iCloud by going to System Preferences and selecting iCloud. See image below.
Be sure to check the box to the left of iCloud Drive and also click on the option button. The option button opens a panel like the one below. Be sure click on the checkbox in the red rectangle.
After doing this wait about 30 minutes and check how much free space you have.