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A debt settlement agreement serves to formalize the renegotiation or settlement of the initial agreement between debtor and creditor. It typically reduces or eliminates the total debt owed, enabling the creditor to forgive a portion of the debt and release the debtor from any further obligations. This forgiveness usually follows the debtor's final payment under the new terms. Additionally, the creditor must cancel any responsibilities of the debtor as outlined in the original contract and agree not to pursue any legal actions against the debtor regarding the original agreement.