Background: I am a 50 year old, sole income earner in NY. Due to the building market, my annual salary was recently reduced by 20% to $116,000. I have two mortgages totalling $371,000 with home value (also recently diminished) of ~$425,000. Here's the kicker: my debt ratio is 92%.... my unsecured debt totals $117,000. I have maxed out my credit cards and very soon I will be unable to meet my monthly shortfall of $2,700.

Dilemma: I have a 401k rollover account in the amount of $300,000. I understand that one should 'never' withdraw from a 401k early unless one is desperate. I calculate that I would need to withdraw all but $60,000 from the account, to get the cash I need to liquidate the unsecured debt. At that point, I would be able to make ends meet.... but leaves me very little for retirement (except for the home, which still has about another 20+ years of mortgage left.)

Question: Should I cash out my 401k, or should I consider bankruptcy? (Would I even be eligible for bankruptcy?)

THANK YOU for your help.