I've been reading your posts over the last few weeks and was unsure whether to reply. I am not a bankruptcy or IVA expert, neither can I advise on depression but I'm going to try something anyway
Let's start here...
You go bankrupt, lose your job and have to hand back the house.
You will not be homeless, you will be rehoused by the council, or a local housing authority, or you can live with you parents. You say you will be 'a bit crammed' - how is that the same as homeless?? - which seems to be a big concern.
Next - you are now (for arguments sake) living with your parents. You claim benefits, and/or get a job - anything that brings the cash in. Your children will continue to eat and go to school.
Next - As the children are in a home environment, fed and attending school they/you will not be in trouble and therefore no-one can be accused of neglect and no-one can be taken into care.
You asked - can anyone disagree with your worse case scenario? Well I just have. I totally disagree with it - as will everyone else that has posted, or will post. Your worse case scenario cannot happen as you have friends and family that will help.
I realise that a lot of your fears stem from the depression and you are getting help with that. I am concerned that your appointment isn't till June - is there a local mental health charity that can help you in the meantime? Ask at your local Doctors surgery or try the local library for info or support groups.
I know that you will read the above, digest it, and still continue to fear your worse case scenario but maybe eventually, some of this will sink in and you will begin to think more postively.
Good luck
Full and Final agreed 28th October 2010.