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Jean,

Wow. This sounds like a bad situation. I'm very sorry to hear about your family troubles.

I'm still trying to work out from under a load of debt myself, and my wife's income dropped about $10k last year too, (but we have no kids) so while my situation isn't as bad, it is at least familiar.

Two things that have really been working for us are

(1) the Debt Reduction Planner in Quicken (don't know if you use Quicken, but if you can get a copy (about $60), and teach yourself to be diligent about it (force yourself to spend time each day updating its records) it can be an amazing tool for rolling around your finances, determining where you're spending the most $$$, give you suggestions for budgeting, etc.)

and

(2) daily budgeting. My wife and I realized that, between the two of us, there's no reason we shouldn't be able to live off $40 per day - max (including groceries). (Again, there's only the two of us, so that number will be higher for your situation).

So whenever one of us gets paid, we figure out how many days are left until the NEXT paycheck, multiply that by $40, and leave ONLY that much in our checking account. Everything else goes to our bills - utilities, insurance, etc., and minimum payments on all the credit cards, except for one - the one with the highest interest rate. The lucky lender who gave us that card gets EVERYTHING THAT'S LEFT.

By only leaving ourselves $40/day to live on, we're really forcing ourselves to sacrifice as much as we possibly can to the credit cards. When we first started doing this, we found out for the first time just how much $$$ we were spending on crap that we didn't truly need. (Oh sure, we THOUGHT we needed it, but we really didn't.) So now we live fairly meagerly ($40/day for 2 people isn't that much when you think about it - considering that it also includes grocery epenses), but we get the satisfaction of knowing that we're working out from under our massive debt, so its really worth it.
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