Final answer:
Stan's bankruptcy filing will result in an automatic stay from collection activities, but not discharge of the debts related to securities fraud. The correct option is C.
Step-by-step explanation:
When Stan files for bankruptcy, one immediate effect is the automatic stay, which halts all collection activities by creditors. This includes stopping any civil lawsuits related to the debts, giving Stan a temporary relief from legal actions taken by investors seeking to recoup losses from the securities fraud.
However, according to the U.S. Bankruptcy Code, debts incurred through fraud, including securities fraud, are generally not dischargeable in bankruptcy. Bankruptcy offers a discharge of many debts, but it specifically excludes certain types of debt, particularly those related to wrongdoing such as fraud, criminal fines, and certain taxes. Therefore, Stan may receive an automatic stay, but he will not be able to discharge the debts that resulted from his fraudulent activities.
It is important to highlight that while many firms in the United States file for bankruptcy every year and continue operating, this is because bankruptcy provides a means to restructure their debts and continue their activities rather than liquidating their assets. This is different from Stan's situation, where the debts are tied to criminal activities. The protections offered by bankruptcy are not absolute, and the integrity of the system is maintained by excluding the discharge of debts incurred through wrongdoing.