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A debt settlement agreement is used to formalize the renegotiation or settlement between a debtor and a creditor. It typically reduces or eliminates the original debt amount, allowing the creditor to forgive part of the debt and release the debtor from any remaining obligations. This forgiveness usually occurs after the debtor makes the final payment under the settlement agreement. In return, the creditor must remove any obligations of the debtor related to the original contract and agree not to initiate further actions against the debtor concerning that agreement.