Keeping liquid in a home equity freeze
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Smith wonders if she should cash out each of her HELOCs she has on two other properties she owns -- her Southern California home and another rental condo in Phoenix -- just so she has it in case those lines of credit are frozen, too.

"I'm considering it," Smith says, who currently has not borrowed against any of her approved credit lines.

That's a financially foolish move, warns Tom Orecchio, chairman of National Association of Personal Financial Advisors.

"Would I instruct them to take the money out now, when they don't need it?" he asks. "Absolutely not. Where would they put the money? In the stock market? That's risky."

Parking the money in a safer, lower-yielding investment also doesn't make sense, according to Orecchio: "They'll park it in cash and earn 2 (percent) or 3 percent, but they'll be paying 5 (percent) or 6 percent" interest for the HELOC.

Moreover, if you borrow up to the full value of your home, and it continues to plummet in value, you've "put yourself under water," Gumbinger says. "That's a financially foolish and risky thing to do."

As for those who are awash in debt? It's time to get used to tightened credit belts and take a more conservative approach to freeing up cash flow.

Orecchio urges consumers to amass emergency cash reserves. That means dusting off some old-fashioned strategies like cutting costs and earmarking extra dollars until individuals amass three to six months worth of basic living expenses to use in case of emergencies.

Homeowners whose credit lines have not been frozen should count themselves fortunate.

"In general, I like the idea of everyone having a home equity line of credit with a zero balance so they can access money when they need it," says Orecchio.

Orecchio explains that it's important to use these tools wisely, especially in a slowing economy. Pay off high-interest debts with them, but don't blow them on pricey luxuries you can save for instead. In general, try not to use your home as a means to get out of a financial jam, he says.

Finally, read the fine print: Banks have always had the right to freeze or scale back credit lines, Gumbinger says.

"Credit conditions in the last couple of years have not been normal," Gumbinger adds. "But we're returning to what normal was. And for some borrowers who haven't experienced that, it may be painful. We'll have to get used to hearing the word 'no.'"

Has your HELOC been frozen? Tell us what alternatives you've been considering.