I can't help myself - I feel a whole hell of a lot of sympathy for you and your wife. Sure, I could point out all the choices you made that got you where you are, but that is neither helpful, nor entirely fair. My husband and I are in a financial pit right now due to the crappy economy, but I have spent endless hours and sleepless nights making metal lists of stupid things we have done to exacerbate the problem. You seem to have a clear grasp of what mistakes you've made and what changes are needed. Stay on track and make those changes, day by day.
One of the biggest things that pisses me off about the way the Gubmint administers all the social programs is that people who truly need the resources cannot navigate the system to get what they need, while generations of moochers have the system down to a science. At least once a week I stand in line behind a woman, dressed in the most expensive cloths, shoes or boots and jewelry, hair perfectly salon-styled, paying for name brand groceries (which haven't seen the inside of my shopping cart in years) with some form of government hand-out. I have friends who teach in schools that are 100% free-lunch, and they tell tales of the kids waltzing in wearing $200 basketball shoes and little leather jackets, dropped off in a Cadillac Escalade. These people are reaping stealing YOUR benefits. If you do nothing else this month, dedicate time to researching, and applying for, and GETTING what you need. Then spend next month planning a way to get off the dole as soon as you can manage it.
The best of luck to you both.