Hancle: Well, to continue your analogy, I did exactly that. I got more money from my credit union to do a variety of things. I was able to fix up my house (after it suffering 15 years of neglect), pay off the equity balance that I owed my ex-wife and make some minor improvements.

I'm making less money now than I did then but my credit score is higher and my bills are being paid on time and (usually) above the minimum due.

Of course, one thing I did during the refinancing (and for a good time before it) was to make sure I knew that I could afford everything after the 'restructuring'. IN the analogy, this would be those budget cuts and tax hikes so to afford the new debt.