debt settlement agreements

A debt settlement agreement is a formal arrangement between a borrower and a creditor where the borrower agrees to pay a reduced amount of what they owe, often in a lump sum or installments, to settle the debt. This typically occurs when the borrower cannot fully pay the debt and seeks to resolve it for less than the original amount. The agreement legally finalizes the reduced debt, releasing the borrower from further obligation once the terms are met. It can help avoid foreclosure or bankruptcy, but may have tax implications and impact credit scores.