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A debt settlement agreement is used to formalize the renegotiation or settlement of an original debt between a debtor and creditor. It typically reduces or eliminates the original debt amount, allowing the creditor to forgive part of it and release the debtor from any remaining obligation. This forgiveness usually occurs after the debtor makes the final payment as stipulated in the settlement. In return, the creditor must remove all obligations under the original contract and refrain from pursuing any legal action against the debtor regarding that agreement.
