I was wondering what the consequences are:

  • is your credit history ruined, or merely dinged? Is the blow recoverable?
  • Can the carrier try to get the money back in court? I assume you'll wind up dealing with a debt collector.
  • Will this affect any other relationships you have?
  • Is it criminal?

Unfortunately I haven't hired a lawyer to read my or anyone else's cell phone contract so it's a bit hard for me to research this.

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    I'm pretty sure it will cost you more in the long run than just paying it. But probably not criminal. – littleadv Mar 3 '15 at 21:39
  • @littleadv cost you how? – djechlin Mar 3 '15 at 21:41
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    dealing with collectors, less and more expensive credit because of the negative point on the credit report, inability to get any more post-paid accounts for a while, etc. Not necessarily direct monetary cost, but definitely time loss and opportunity loss. – littleadv Mar 3 '15 at 21:43
  • @littleadv yeah one of my questions is what the impact on the credit score is, that's the main risk I've seen. not getting post-paid accounts isn't an issue since early termination fees just make them pre-paid anyway unless you're in danger of being so low on money you can't afford a phone at all. dealing with collectors I don't know what entails, presumably you just screen calls and ignore mail though. and the advantage is you can change carriers without paying several hundred dollars. – djechlin Mar 3 '15 at 21:45
  • So why enter such a contract to begin with? Not enough prepaid cards in the neighborhood supermarket? – littleadv Mar 4 '15 at 8:47

is your credit history ruined, or merely dinged? Is the blow recoverable?

Any bad credit rating event is recoverable given enough time / money to solve the problem. As far as "Ruined" vs" "Dinged", well, that's a matter of opinion; some people think that one bad item is the end of the world, others not so much. You will have an unpaid debt listed on your report. This will drop your score. The amount it impacts the score will depend on other factors in your report.

Can the carrier try to get the money back in court? I assume you'll wind up dealing with a debt collector.

Yes they could go to court, but that's unlikely at least in the short term. Far more likely is that the debt ends up sold to a debt collection agency for pennies on the dollar. The debt collection agency will harass you until you pay and they might file in court if they think the debt is more than enough to cover the court costs.

Will this affect any other relationships you have?

Possibly. A bad rating may make it more difficult to get credit in the future. However that depends on numerous other factors such as your entire history. It could even prevent you from being hired from certain jobs - not many of them, but some.

Is it criminal?

Read this: http://www.startribune.com/investigators/95692619.html The US does NOT have a debtors prison. However if the company decides to file a court case and you fail to appear or fail to abide by the court ruling then, in some states, you could be committing a crime and may be thrown in jail. At which point you are on the hook not just for the original fee but potentially a plethora of other costs. Never mind the loss of reputation when your friends, family and coworkers find out that you are sitting in jail.

At the end of the day, just pay the debt. If you agreed to the plan and the plan has an early cancellation fee then the moral and ethical thing to do is pay it. Trying to see how bad it would be to ignore it isn't the right way to live.

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  • I'm with you up until the "moral and ethical" part. David Graeber has written extensively on this topic, although a much more quippy explanation appears in this comic. – djechlin Mar 4 '15 at 15:47
  • "Trying to see how bad it would be" is a negative way of saying "apprising yourself of your rights," also. – djechlin Mar 4 '15 at 15:48
  • Do you know how much your credit score might fall? – djechlin Mar 4 '15 at 15:53
  • @djechlin: Contrary to popular belief, there is no single "score". Each reporting agency uses it's own computations to come up with a score. They even have different factors based on the requesting institution. For example, the "score" Equifax gives you is likely different from the score it gives your bank which is different from the score it gives the bank down the street - even though it's all based on the same info. Even "one" score, like FICO, has multiple derivatives. So it's impossible for me, or anyone else, to say with any authority how an individual item might impact you. – NotMe Mar 4 '15 at 16:39
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    @djechlin: Regarding ethics, if you agree to something and purposefully fail to follow through then you are being unethical and I'm at a complete loss for words given your desire to justify that behavior. There are quite a few issues I have with the "student" in that comic. I have no comment on Graeber as I've never read the book myself. – NotMe Mar 4 '15 at 16:48

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