Terkel is a normal boy who's in 6th grade at a secondary school together with his best friend Jason, who carries an iron pipe with him at all times. Terkel and Jason are playing a Game Boy in the schoolyard one day when a strange man in a green panda sweater approaches them. The man, Justin, tells Terkel that he has sat on a spider. "Nothing to worry about. They're just jeans. They can be washed." Terkel says and after that the nightmare starts...
Terkel's teacher gets fatally run over, and the class's new teacher is the strange Justin. Terkel's parents get married and the two "bad boys" in his class, Sten and Saki, manipulate Terkel to steal beer for them. When Terkel's uncle Stuart Stardust notices, he beats up Sten and Saki, for which they blame Terkel, so they begin bullying him, but no-one seems to want to help him.
One day the overweight girl in the class, Doris, approaches Terkel with a love letter. When Sten and Saki notice, they start teasing the two of them, calling them a couple. Terkel is torn: he wants to defend Doris, but instead, because he'd rather save face in front of the cool kids, he says "I'm certainly not in love with a fat cow like that!" Doris gets so upset that she jumps out the window from the fourth floor and dies. After that Terkel starts receiving death threats: on his desk, painted on the ceiling of his room, on a stone which breaks his window, in his notebook... His parents aren't of any help - his mother tells him about all the diseases he might develop and his father only seems capable of one word: "No".
Justin decides to arrange a school camping trip to study salamanders, but Terkel doesn't want to go. He begs his parents to let him stay at home, but they refuse. On the bus he is about to sit down with his best friend Jason when Sten and Saki invite him to sit down with them instead. Terkel does so, and Jason becomes angry. When they get to the forest where they are going to study the salamanders, Sten and Saki want him to sleep in their tent - he does. He gets a shock later when Saki stumbles into the tent with a black eye, telling him that Jason has beaten him up. Terkel thinks that Jason is acting strangely aloof, and Sten tells him that Doris was Jason's sister. Terkel is terrified, and thinks that all the death treats were from Jason, because he made his sister commit suicide. As they're going to bed, Terkel finds a dead cat in his sleeping bag and he receives a text message from Jason's phone which says "I'm coming to kill you". Sten and Saki advise Terkel to tell Justin, which he does. He wants to be safe from Jason, so Terkel insists that Justin come with him into the woods where he explains everything. Then he says "I'm gonna call Jason right now and say that I have told you everything". Justin protests but Terkel does so and to his horror, he hears ringing sounds come from Justin's pocket. The plot unravels, and it turns out all the death treats and messages had been from Justin as a revenge for Terkel sitting on the spider when he first met them. Terkel flees, and a thrilling race through the woods commences. Just as Justin has Terkel cornered, he is saved in the knick of time by Jason, who finally puts his iron bar to use.
The final credits include some outtake/blooper scenes, such as, Terkel's father being unable to remember his lines.
Terkel's father is always reading the same paper. Translated from Danish, it is called "Extra Hate", with the motto "Judges where others doubt", a play on the danish lunchtime paper "Ekstra Bladet", who has the motto "Dares where others stays silent". The articles on the front page are "Cowboy sued: Has bad sense of humour and smells like cow", "Psychopath on the loose: Disguised himself as a guard dog and played dead" and "Puke yourself thin". The inside of the paper, that Leon is perpertually reading has the articles "Police chases young knifekiller" and "El Gigante fights dwarf". The backpage reads "A green pin", or possibly "A green stick", as in gluestick or lipstick, depending on how one translates "stift", which can also be slang for male genitalia, but most likely it is slang for a bottle of beer, which in Denmark usually comes in a green bottle.
Terkel in Trouble was nominated for several awards in 2005, winning the Audience Award, the Best Children/Family Film, the Best Original Score, the Best Song and Best Sound awards at the Robert Festival, where it was also nominated for best screenplay. It also won Best Danish Film at the Bodil Awards, the grand prize at Zagreb and was nominated for Best Feature at the Annecy International Animated Film Festival.