Agreement between debtor and creditor: Everything you need to know

When a debtor is unable to pay their debts to a creditor, an agreement can be made between both parties to settle the debt. This agreement is usually called a debt settlement agreement, and it outlines the terms and conditions for the repayment of the debt. In this article, we will discuss the basic elements that should be included in a debt settlement agreement.

1. Total amount owed

The total amount of the debt owed should be clearly stated in the agreement. This amount should be agreed upon by both parties and should include any interest, fees, and penalties.

2. Repayment schedule

A repayment schedule should be included in the agreement, outlining when and how the debtor will make payments. The payment schedule should be reasonable and take into account the debtor`s ability to repay the debt. The agreement should also specify the consequences of missing payments.

3. Payment method

The method of payment should also be agreed upon. This can be done through a variety of methods, including cash, check, or electronic transfer. It is important to specify the payment method to avoid confusion or misunderstandings.

4. Release of liability

Once the debt has been fully repaid, the creditor should release the debtor from any further liability. This means that the creditor cannot take any further legal action against the debtor for the debt in question.

5. Confidentiality

If desired, a confidentiality clause can be included in the agreement to ensure that the terms of the agreement are not disclosed to third parties.

6. Duration of agreement

The duration of the agreement should also be specified. This can be for a fixed term or until the debt is fully repaid.


A debt settlement agreement between a debtor and a creditor is a legally binding document that requires careful consideration. It is important to seek professional advice before signing any agreement. A well-drafted agreement can ensure that both parties are clear on the terms of repayment and can avoid potential conflicts between the debtor and creditor.