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A debt settlement agreement formalizes the renegotiation or settlement between a debtor and creditor. It typically reduces or eliminates the original debt amount, allowing the creditor to forgive part of the debt and release the debtor from remaining obligations. This forgiveness is generally contingent upon the debtor making the final payment after the settlement is executed. Following this, the creditor must remove any obligations of the debtor under the original contract and relinquish any rights to pursue collection actions related to the original agreement.