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A debt settlement agreement formalizes a renegotiation between a debtor and creditor, often resulting in a reduction or elimination of 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 occurs after the debtor makes a final payment following the settlement execution. In return, the creditor is expected to eliminate the debtor's obligations under the original contract and refrain from pursuing any legal action against the debtor concerning that original agreement.
