My husband and I curreently have a mortgage (in good standing) of $275,000. We have approximately $60K in credit card and health care charges that are due (approximately $20K is in good standings and paid to date) the remainder is past due and we are receiving collection notices. My husband is a waiter for a large chain and has seen his hours and tips decrease drastically for the last 18-24 months. I am supporting a good portion of the household on my $44K salary.

I am frightened and embarrassed at the financial situation we are now in and feel bankruptcy may be our only option. I have sent letters to the credit card collection agencies requesting help in reducing the balances due and the payments required but have had no response. IS there a way for me to handle the reduction requests on my own? Is bankruptcy our best choice and where do I start. Will we lose our home?

We both have 401Ks with approximately $20K in each and I have considered cashing those out to pay everything off and start over. Is this a better option?

Cashing out your 401k isn't a good idea because unless you are at the right age you will have to pay taxes on it and early withdrawel penalities so I would avoid that route. If your mortgage is good and you are not behind then try calling the creditors you owe and work out a payment plan. If you can, work out a payment plan and get it in writing
And then make sure you keep up your end. I would avoid bankruptcy. I know it is hard in this economy right now but with his hours being cut maybe he find a partime job and put that money into paying off the cc