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A Debt Settlement Agreement is a document used by a Debtor (the person who owes money) or Creditor (the person who is owed money) to resolve an outstanding debt that is owed. Often, a Debtor finds themselves unable to pay the full amount of a debt that they owe to a Creditor.
This Agreement allows the two Parties to negotiate and come to a consensus about a lesser amount of money that the Debtor will pay to take care of the debt. This way, the Debtor can afford to repay the debt and reduce its effects on their credit health while the Creditor can accept a lesser amount to recoup some of their losses. This Agreement can be used to either put in writing the terms of the agreement that the Parties have negotiated or it can be used for one Party to propose to the other Party the terms of resolving the outstanding debt.
How to use this document
This document includes all of the necessary details to put in writing the terms of an agreement between a Debtor and Creditor to resolve a debt that is owed. First, the document outlines all of the pertinent identifying details, such as the Parties' respective addresses, contact information, and names of legal representatives (if applicable).
The document then includes the most important characteristics of the agreement between the Parties, including the original amount that is owed, the new amount that the Debtor will pay to the Creditor, the manner in which the repayment will occur, and the final date when the Debtor will finish repaying the Creditor. Finally, the document can include optional details about the agreement, such as the Parties agreeing to refrain from suing each other or keep the details of their agreement confidential.
Once the Parties have completed the document and agreed to all of the relevant details, they (or their legal representatives) should both sign the document and then keep copies of the document in a safe place for future reference.
Debt Settlement Agreements are governed by state-specific laws in the United States, which cover debt principles, like a necessary executed written acknowledgment, as well as general contract principles like formation and mutual understanding.
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