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A debt settlement agreement formalizes the renegotiation or settlement between a debtor and creditor, often resulting in a reduction or elimination of the original debt amount. This agreement allows the creditor to forgive part of the debt, releasing the debtor from any remaining obligations. Typically, this occurs after the debtor makes the final payment post-execution of the settlement. The creditor must then waive any further rights to pursue the debtor regarding the original contract, ensuring the debtor is no longer bound by its terms.