To file soon, need help

[Jimmy]

Hello,
I intend to file sometimes next month and I have a few questions. Hope you can help.
First of all, the main reason for me to file is to strip the second mortgage.
I've been stopped paying both 1st and 2nd morgage almost 3 months ago.
I am single and my annual income is about $ 46,800 which is below the California median income of $ 47,373 (qualify me for 3 years plan).
Here come my questions:
1) After 4,5 months behind in payment , the 1st mortgage charge will be around $ 10,900.00 when I file , devide that amount for 36 months would be about $ 303.00. My DMI is only $150.00 so I will not have enough money to fun my plan. However, I have a cash value of $7,300.00 from my whole life insurance which I intend for the trustee to collect and pay to my first mortgage (the only secured). After that, it only required about $100.00 for my secured mortgage loan and the extra $ 50 will go to unsecured . Will the trustee approve that?
2) I understand that I will have to pay tax on the $7,300 cash value when withdraw BUT will that amount be added to my income and disqualify me for the 3 years plan.
3) Should I pay my 1st mortgage for this month only before it become defaut? it will be after 12/20/08
4) I live in Santa Ana, California and had called 2 attorneys to find out how much would they charge me. Both of them wanted $ 4,400.00 for chapter 13 and $ 1.500.00 more for the lien stripping ($5,900.00 total for my case). Is that reasonable? Any good attorney in my area recommendation?
I must apologize for my limited English and thank you all in advanced

[HHM]

Hold on, if you didn't have to pay your 2nd mortgage and other debt, how can you not squeze out a $350 per month payment?

What percent of your monthly gross income is your 1st mortgage payment. If you only have DMI of $150, I am guessing the 1st mortgage is probably too expensive anyway.

[Jimmy]

My first mortgage is $ 2070.06. 401K contribution $ 110.00. Property tax and insurance $273.00. The rest of the expenses are already less than IRS guide lines in order to have the DMI of $150.00

[HHM]

That's what I figured, you are not going to like this....

BUT, you need to let the house go, you CANNOT afford it. The first mortgage payment is 53% of your GROSS monthly income based on the numbers you have provided.

The writing is on the wall, you are going to lose this house anyway (unless you have another source of income you have not disclosed...keep in mind, for a 13, ALL sources of income count). The chapter 13 will only delay the inevitable. You cannot afford that house and you cannot afford a chapter 13.

File a chapter 7 and surrender the home.