Part of Vermont -- an awful state (7)
I believe the answer is:
montana
'state' is the definition.
(Montana is an example)
'part of vermont an awful' is the wordplay.
'part of' says the answer is hidden in the clue.
'MONTANA' can be found hidden inside 'vermont an awful'.
(Other definitions for montana that I've seen before include "American state, capital Helena" , "The "Big Sky State"" , "Nato man (anag) - US state" , "One US state ..." , "NW US state" .)