Your credit scores should improve because your utilization would decrease after paying of your card(s). However, even if the interest rate is lower on your mortgage you will be paying interest on that 20k over 15-30 years. You might consider paying off those cards ASAP outside the refi for this reason.
Hopefully you are not contemplating bankruptcy. But if you do declare bankruptcy and do not reaffirm and agree to repay your mortgage in full the bank will foreclose in all 50 states. The homestead statues referred to by jeanie protect debtors against judgments by unsecured creditors such as credit card companies. Because the money you borrow to purchase or refinance your home is secured by the home itself the homestead statute will not protect you. If that were the case no one would ever pay their mortgage.