MONEY CLINIC | Can I upgrade my cellphone contract while under debt review?

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A cellphone contract is considered to be a service agreement, not a credit agreement.
A cellphone contract is considered to be a service agreement, not a credit agreement.
Delmaine Donson/Getty Images

A Fin24 reader who took out a cellphone contract before entering into debt review wants to know if it's possible to have upgrade her cellphone contract.

She writes:

I have a cellphone contract that I took before I went into debt review. My contract is due for an upgrade. Can I do a cellphone contract upgrade while under debt review?

Benay Sager, chief operating officer at DebtBusters, responds:  

A cellphone contract is considered to be a service agreement - not a credit agreement. As a result, it is generally not part of the debt counselling (or debt review) process (unless the consumer is in arrears with their cellphone contract, in which case the cellphone contract could become part of the process). In this case, given that the consumer is still enjoying a cellphone contract, they are probably not in arrears, and therefore the cellphone contract is being paid by the consumer outside of the debt counselling process.

We further assume that the cellphone contract the consumer is paying towards is budgeted for as part of the debt counselling process, and that their new upgrade will not cost significantly more than what they were paying previously. If so, our view is that since this is merely an upgrade, the consumer should have no problems in trying to upgrade/update their cellphone contract.

On the other hand, if the consumer will pay significantly more towards the upgraded plan, then they would need to discuss this with their debt counsellor to make sure their budget caters for this additional amount. 

The cellphone provider may conduct a credit check and would potentially become aware that the consumer is under debt counselling – however, since there is already a contract in place, this should not become an issue with the consumer. From time to time, we come across consumers who want to rent a new apartment while under debt counselling – a similar situation to cellphone contract.

In those cases, the debt counsellor could provide the consumer a letter confirming that they are under debt counselling and are maintaining regular payments. So, for any avoidance of doubt, we would advise the consumer to take along such a letter when trying to upgrade their cellphone contract.

Questions may be edited for brevity and clarity.

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