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When it asks if you want to keep your holds, tell damn skippy, you do. You will immediately be at war with your old kingdom, but as you are not a kingdom, just talk to any lord and barter for peace. It shouldn't cost you all that much.
Then you will be an independent clan, and no one will attack you unless you attack them first.
Don't be in a hurry to declare your kingdom, Take your time and develop your clan and save up a war chest.
Civil Wars do not exist in the vanilla game.
In the vanilla game, it does seem to be a very likely the player is voted the next leader. I don't think the AI just spawns money, but they do have a 'hidden' bank account they can draw from. If that goes dry, the faction is just broke. As the player, you have the ability to earn way more money than the AI (not even needing Smithing to cheese in your money), so it's not that hard once you have a better grasp of the game. Faction expenses are shared between all the clans.
If you're trying to do the Campaign quest, you must conquer your eventual foes. Painting the whole map is not a requirement. If you want to go for that on your own, go at it. It's a Sandbox game, and it's up to you to determine your objectives.