Juice – I think there have been alot of good ideas about the way to payoff the cards or consolidate the debt. What is more worrisome is how will you help them break this habit. I would advise that before you come up with the solution, of which there are many, the harder task is identifying the root cause of the problem.
First thing first is to identify how they have come to accumulate so much debt. Has the accumulation occurred over time due to excessive buying or has it simply been the cost of daily life? If you do not figure that out then it doesn’t matter what you do, they will be in hot water again over time. Then come up with the recovery gameplan. Honestly I agree with duuuuude about a HELOC or even a refi with cash out may be the better deal. I think the quickfix solution of the 401k is not psychologically healthy. I think the fix (a higher mtg payment or a HELOC) acts as little bit of a reminder of what will happen if they do it again. Also losing a good portion of your 401k can be stressful.
Whatever solution you provide, identify the root cause AND definitely make sure they implement a strict new regimen immediately. Otherwise all your work will have gone to waste.
