According to the News Of The World, a psychiatric nurse had to be called to the star's home in Warrington this week after she rowed with her husband Mark Croft.
One friend told the newspaper: "Kerry has gone into complete meltdown, she's in a right state."
The bankrupt I'm A Celebrity winner is said to be convinced that Croft is having an affair with his ex-girlfriend Louise Oortwyn, the mother of his seven-year-old daughter Keeley.
Her suspicions reportedly led to a huge bust-up between the couple when they attended the funeral of Croft's aunt on Tuesday.
"Mark wanted to pay his respects but had to leave early as Kerry was all over the place, ranting and rambling," a source explained. "They had a huge row when they got home and Kerry was so hysterical they had to call out a psychiatric nurse to calm her down.
"Then in the middle of the night Kerry called a taxi and went to stay in a hotel. She couldn't cope with being in the house any more."
The newspaper also claims that Katona is worried about losing her lucrative deal with supermarket chain Iceland. Dancing On Ice star Coleen Nolan has been the main star in the frozen food firm's recent ads.
An Iceland spokeswoman insisted: "Our advertising coincided with Coleen's appearance on Dancing On Ice. As the year goes on we will feature whichever celebrity appeals most to our customers."