Should I refinance my home?

I bought my home 1 1/2 yrs ago, with no money down. My interest rate is 5.454. Amount financed was $58,500 and the property is valued at 60,000. I didn't realize how much I had in bills and now find my bills are eating me alive. I have been to a debt counselor and am getting some help but with medical bills, I feel I am in a losing battle. I am considering refinanceing with money from my retirement.. about $5,000 as a down payment to lower my monthly payment. Or should I let it go back to the bank and get an apartment.

My first question for you is the current loan that you have a fixed rate or ajustable loan? Since you just bought the house 1 1/2 years ago there is not enought money or equity in the hosue to justify refi now and if you have a fixed rate loan, you can't get that rate today so I would keep the current loan. IF it is an adjustable rate then it MIGHT make sense if you plan on keeping the house for over 3 years. That is the time that it will take to offset the costs of the refi.
The problem is NOT the house payment, the problem is like you state,"YOU didn't realize how much YOU had in bills." So this is a money management problem and NOT a loan problem.
A house will go up in value over time and so if there is ANY way to keep the house then that is your best LONGTERM option. You need to look at where your current income is going and then make a plan to live on LESS then you take home. Medical bills can be paid over time and they will usually work with you on a payment plan that you can afford.
Pulling funds out of a retirement account is going to be VERY expensive, try 10% penalty PLUS about 30% in income taxs so to net 50K,you would have to withdraw 85K. Another not so good solution.
What MAY work is to stop charging thing you don't need on creditcards, no Starbucks and such, stop eatting out so much, AND check into either getting a roommate of renting out the whole house. IF you can rent the house for more then the cost of keeping it, meaning loan payment, taxs, and landlord insurance; then maybe you can rent a room or apartment while still keeping the house and lowering your monthly expenses.
The house is the LAST thing you should consider getting rid of because other then your retirement account; it is the ONLY thing that will go up in value over time. And the house will probable be better then your retirement account if you have everything in mutual funds that somebody else manages.
Work with the debt counslor and there has to be things you can cut back on besides assets that go up in value. Do you have a car payment? Can you downsize there and save on payment, insurance, maintence, gas?
Get rid of things that go DOWN in value over time and keep the things that go up in value over time. And getting a second job should also be on your radar screen. It is NOT that tough, I had NOT 2, NOT 3, BUT 4 FULLTIME jobs at once. It can be done.

refinancing won't help you.

That's a tough question. There is not much equity in your house, and if you can/t pay all your bills, then the choice should be, give up the house.

5000 would not lower your mortgage payment that much and the costs of refinancing would just about kill any gain. You would be better off using that 5000 to pay off some bills and get rid of a payment. If you are foreclosed that will affect your credit negatively. You might also want to consider if you could find a place to rent that is cheaper than your current mortgage, as for a mortgage of 58500 your mortgage payment is probably lower than most rents.

go back to an appartment. I bet your house is worth 45K now

Usually not worth it to refi unless the interest rate drops by 2% and I think the rates are higher now then what you're currently at.

Unless you get a deal there are also fees and closing costs again which can add up and eat any gain you think you might make. You've also not built up enough equity to make a difference either.

Try to hold onto the house because defaulting on your loan or letting the bank have it back will kill your credit for years to come.

Perhaps you can get a roommate for a while to help with the mortgage. You may be able to work a deal with the bank to have reduced payments for a while - but there are consequences to that as well.

Try not to take money from your retirement fund.

You are not going to get a better interest rate then 5.454. That was a fantastic deal to be frank. If you can't afford the home, you may want to consider a consultation with a real estate agent. if you have any equity compared to the current market price, you are better off trying to sell. It wont cost you anything since the real estate agent works off commision. If you choose just to let the bank foreclose, and evict you, then expect to get sued. The bank will come after you for their legal fees to retake the property plus any difference for what the home sells for at auction.

Pulling money from a retirement account is almost NEVER a good idea. Taxes and penalties will take 40% or more of the money. Refinancing probably won't help. The rate you have will be hard to beat and you probably can't extend the term to reduce your payments. That said, DON'T 'let it go back. If the bank forecloses, they will sell it cheap and you will still owe the difference AND the cost of foreclosing. Sell the house yourself and make arrangements to pay any shortage.