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A debt settlement agreement is a formal acknowledgment of a renegotiation between a debtor and creditor. It typically reduces or eliminates the debtor's original debt, allowing the creditor to forgive a portion of it. This agreement means that once the debtor makes the final payment post-settlement, the creditor must release the debtor from any remaining obligations of the original contract. Additionally, the creditor agrees not to pursue any legal actions against the debtor pertaining to the original agreement.
