Debt settlement, also called debt negotiation, is a process by which creditors (the lenders) agree to forgive a part of a balance, saving the debtor (the borrower) up to 50%+ of what was owed. The debtor must pay the new agreed-upon sum only and no more. In some cases, the debtor may continue to make monthly payments until the newly agreed balance is paid. In others, the debtor must make a lump-sum payment. The forgiven balance MAY be considered taxable income by the IRS and MAY be noted on a form 1099-C. Check with a tax advisor. The settlement may also be noted on the debtor's credit report.