The question is "what are the chances they will default (again?) within the time period of the loan?". That determines the interest rate and the change you will loan it to them.

If after the default, they are in a reasonable state, then yeah, people will lend them money, because there is a good chance they will make a big enough profit.

You WANT to be a lender which balances the risk with the rewards. You don't want one which just blanketly says no to something which has a low risk, which will make a lot of money because you are arse hurt about it.

Of course, but if the lenders miscalculate the risk then that's on them.

Many of those lenders are pension fund managers, who are responsible for managing normal people's retirement funding. This is not a good thing for anyone.