Ok, after reading everyone's responses and looking up a bit more about cashing in 401ks, I'm going to go along with the consensus and forget about cashing it in. It just seemed like a possible solution at the time, but admittedly that was before I really knew anything about it. I've already emailed my bank (USAA) to see what I need to do in order to open a traditional IRA for the rollover, and then what I need to do to transfer the funds again over to my existing Roth IRA (also with USAA). I'm unclear whether I can actually do this, or whether I will simply have to end up with two separate Roth IRA accounts. (I hope not!) I'm awaiting their response.
Sweeps, thanks for your suggestion on how to allocate debt payments. Actually I have figured out what will work the best for us, given what we earn and can afford to pay, is to focus on the "snowball payment" approach. For instance, in two months time we will have 3 of our 5 credit cards paid off. That means that $270 in monthly payments will be freed up to go elsewhere.
Instead of just keeping those funds in our checking or savings account, we'll reallocate them towards the other two remaining balances. Currently we pay $315/month to USAA and $120/month to Citi. We can up those monthly payments to $400/USAA and $305/Citi. Or perhaps $375/USAA, $230/Citi and $100/savings. Since those are way more than our actual minimum payments due, we should be able to chip away at it all much faster.
Kristine, I can appreciate your comments about an emergency fund. We actually had some savings but went through that before we decided to apply for more credit cards. We still have some savings left, about $2500, in our ING savings account @ 4.25% APR. Some of THAT will go to pay off our $1900 MBNA card next month. The rest I don't want to touch.
We don't use our credit cards anymore, haven't in months. Everything comes out of our checking account now. Any "extra" cash we get, like birthday checks, etc., go directly into the savings account. (Our birthdays are in December and February, so we have a bit of a wait for anything like that again!) One upside of using the MBNA card was that we accumulated enough rewards points to get $120 cash back check. We just need to redeem that, then put those funds right back out there to pay down debt. (For the same number of points we only qualify for a $100 gift card -- go figure!)
These forums are so great because everyone is so encouraging and understanding. Everyone's kind words make me feel like maybe there's some hope to dig out of this.
~ Jenney