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A debt settlement agreement is used to formalize the renegotiation or settlement of the original debt between a debtor and creditor. It typically reduces or eliminates the total debt, allowing the creditor to forgive part of it by releasing the debtor from remaining obligations. In exchange for the debtor's final payment after the agreement is executed, the creditor agrees to remove any existing obligations under the original contract and waives the right to pursue further action against the debtor regarding the original agreement.