Formal Creditors Proposal compared with Informal Creditors Proposal

Feature	Formal Creditors Proposal (Part 5)	Informal Creditors Proposal (S55)
Privacy	Private. Not advertised or listed on public insolvency registers.	Completely Private. A confidential negotiation strictly between you and your creditors.
Flexibility	Highly Flexible. Custom terms based on actual affordability (e.g., lump sums, partial asset sales, or varied instalments).	Maximum Flexibility. No statutory rules. You can negotiate any terms, timelines, or debt-forgiveness arrangements the creditors will accept.
Court / Government Involvement	Moderate. Managed by a Licensed Insolvency Practitioner. Requires Court approval to finalize.	None. No court, no Official Assignee, and no formal legal process involved.
Creditor Protection	Immediate Statutory Shield. Once approved, all creditors are legally bound and barred from calling you. Communication routes entirely through your Trustee.	Negotiated Shield. Stops calls and payments only for the creditors who agree to sign the contract. Does not legally bind any creditors who refuse to participate.
Debt Limits	No upper limit. (Typically used for complex debts over $25,000).	No limits.
Impact on Business	No statutory restrictions on acting as a company director or continuing to trade.	No statutory restrictions. Business can continue as usual under the new negotiated terms.

Key Takeaway: A Formal Creditors Proposal offers the best of both worlds if you have uncooperative creditors: it keeps your affairs private and flexible while giving you a powerful, legally binding shield against all creditors. An Informal Proposal is faster and avoids the courts entirely, but it only protects you from the creditors who explicitly agree to the deal.