Lending someone money, whether an individual or a company is always a risky affair. Due to the uncertainty in the movement of market forces, there is never a guarantee that you will get back the entire amount of the loan. Rather, in most cases, the recovery of the loan does not happen. The debtor usually finds himself in a fix at the time of repayment. However, this has led to the creation of the concept of “Debt Settlement”.
Debt settlement is where a creditor gives his/her consent to forego a certain percentage of the outstanding amount. He agrees to settle at a reduced final figure of the total amount due. The Debt Settlement Agreement is a written agreement between a debtor and creditor where the debtor agrees to pay the creditor the outstanding debt due to him.
It is also known as the Debt Compromise Agreement. This agreement can be legally enforced by printing it on a non-judicial stamp paper, affixing the stamp duty as per the state laws, with the signatures of both the parties agreeing to it.
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