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A debt settlement agreement serves to formalize a renegotiation between the debtor and creditor, often reducing or eliminating the original debt amount. This agreement allows the creditor to forgive a portion of the debt, releasing the debtor from any remaining obligations. Typically, this forgiveness occurs after the debtor makes a final payment stipulated in the settlement. The creditor must then eliminate any obligations under the original contract and agree not to pursue any further actions against the debtor related to that contract.