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A debt settlement letter is a formal document used to negotiate an agreement between a debtor and a creditor or debt collector to settle a debt for a lower amount. It typically outlines the debtor's intention to pay either a lump sum or through a payment plan. The debtor must ensure they can afford the agreed payment; otherwise, the settlement offer is voided, and the full original debt must be paid. Key components of the letter include the debtor's name, the proposed payment amount, the specific account in question, and a deadline for payment or response. It's important not to send a check without written confirmation that the settlement will fully satisfy the debt.