Everyone was in debt, it is conceded (7)
I believe the answer is:
'conceded' is the definition.
('allow' can be a synonym of 'concede')
'everyone was in debt' is the wordplay.
'everyone' becomes 'all' (all people).
'was in debt' becomes 'owed' ('they owed' means 'they were in debt').
'it is' is the link.
(Other definitions for allowed that I've seen before include "Gave permission" , "permissible" , "Given the chance" , "Permitted and granted" , "Acknowledged" .)