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A debt settlement agreement formalizes the renegotiation or settlement between a debtor and a creditor, typically reducing or eliminating the original debt amount. It permits the creditor to forgive part of the debt, releasing the debtor from any remaining obligations. This forgiveness usually occurs after the debtor makes the final payment outlined in the debt settlement agreement. In return, the creditor must also relinquish any claims against the debtor related to the original contract and forgo pursuing any further action, such as auctions, concerning the initial agreement.
