May I file Chapter 7 bankruptcy in the state of PA and keep my home since I owe substantially more than what the property is worth (had appraisal)?
Yes, you probably can. Since there is no equity to distribute to creditors, you should be able to keep your home. However, you'll the need to decide whether or not you want to "re-affirm" the mortgage debt.
If you re-affirm then you remain personally liable for the debt and if the home should later go into foreclosure and sells for less than the remaining mortgage balance, you can be held liable for the deficiency. The upside to this is that any payments that you make will be reported on your credit report and help you to re-establish credit.
If you don't re-affirm the debt, then you cannot be held liable for any deficiency should it come down to that. However, any mortgage payments that you make will not be reported on your credit report so you won't build up your credit as quickly as you might if you were to re-affirm.
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