This is one step removed from repossession by T-Mobile. With the new plans, they've joined Verizon and Sprint in selling phones that they own until the contract is paid up. All three companies can disable a phone (ESN on VZW/Sprint, IMEI on T-mo) if the bill is not paid. With T-mo, the phone is purchased on installment payments separately from the service contract, lowering the price of the service once the phone is paid for. If the phone payment is not paid, service will terminate just as if the service was not paid, though in a different manner. The SIM card is deactivated if the service is not paid, the phone is disabled (IMEI block) if the phone payment is not made.
This reminds me of a case involving a friend of mine years ago. He had purchased a dirt bike on credit from a dealer. When he fell behind on the payments, he sold the bike and spent the money on something other than bike payments. Most people don't know whether there is or is not a title to any dirt bike, or to a certain bike in particular, so it's pretty easy to sell a titled dirt bike without a title. The bike was sold, and that was the end of it for a while.
My friend was registered at a riding area near the bike dealer. So was the person that bought the bike from him. The dealer saw the bike at the riding area, loaded it up and repo'd it. The buyer was furious, naturally.
In the end, the dealer was right to repo the bike, sell it, and sue my friend for the difference. The buyer was right to sue my friend for his damages (roughly equal to the cost of the bike). As would be OP to sue for cost of the phone, or pay off the bill at T-mo and sue for that amount.