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A debt settlement agreement formalizes the renegotiation or settlement between a debtor and creditor. It typically reduces or eliminates the debtor's original debt, allowing the creditor to forgive part of it. This forgiveness occurs in exchange for the debtor's final payment following the agreement's execution. Once the agreement is in place, the creditor is obligated to remove the debtor's obligations under the original contract and cannot pursue any further action against the debtor concerning the original debt.
