A growing number of homeowners are walking away from their homes, giving their keys and their worries to the bank. It’s important to note, however, that this isn’t aways possible for borrowers who have a HELOC.

Homeowners living in a “recourse state” will still be responsible to pay off their home equity line, even if they do not own the property anymore. The HELOC lender may be able to seek a judgment against them or even garnish their wages.

CNBC expert John Ulzheimer discusses the consequences of waking away or giving up to foreclosure in a recourse state:

“Unfortunately the second lien holder (the company you owe the smaller amount) will likely get nothing out of short sale. Depending on how much you owe them and how much money you make you may be able to work with them on converting your HELOC into an unsecured loan that you will continue to pay over the next decade or two. You’re paying on a loan that gets you nothing at the end of the day so keep that in mind.”

To find out how your state handles HELOC foreclosures, take a look at this List of Non-Recourse States and contact a legal professional in your area.

Tags | Heloc, home equity line of credit, non-recourse states, recourse states