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A debt settlement agreement serves to formalize the renegotiation between a debtor and a creditor. It typically reduces or eliminates the original debt owed, allowing the creditor to forgive part of the obligation. Upon the last payment made by the debtor after the agreement is executed, the creditor should release the debtor from any remaining obligations under the original contract. Furthermore, the creditor renounces the right to pursue any legal action against the debtor concerning the initial agreement.