The general theme is femboy pet rogue. It evolves yes, but Terry himself also acquires a kink to being your pet.
Terry is more or less in indefinite parole. Truth is, no one cares about him in Rigard. They just wanted someone to blame so they could say: "See? We protect the nobles. Even scum like Krawitz."
Twins pulled a few strings and it was determined that a life of slavery was an okay replacement for the death penalty. It just so happens that the twins named you as the "owner".
Now it's important to note that Jeanne, for all intents and purposes, doesn't actually serve the crown. She more or less coexists with them. So they demanded magical means to make the fox obey his guardian, and she did, just not with the effects or restrictions they'd wanted. You'll see she oftenly suggests you remove the collar yourself.
Now, we could give the PC the option to do that, but if you did, you'd be putting you, the twins, Jeanne, and Miranda (she's likely to get roped in) in a tight spot. That is way too complicated and gamebreaking to be accounted for properly, so the option doesn't exist.
In regards to the collar's magic, its magic won't run out, ever. But if Terry is not wearing the collar, then the magic can't affect him, hence total freedom. The time when he does this will be during his personal quest. Never forget that he was mentored by a very good thief, and he himself is pretty crafty. While Terry's knowledge of the magical doesn't come close to a mage's, being a thief in a world where magic traps are a thing, he's learned a thing or two about giving those the slip.
Given time and some trial and error, Terry can probably escape from any situation. Maybe not unscathed, but definitely alive. He's just like Batman in that way.