I would guess that the issue came from losing the flag, and the disparity in amount owed built up over years, thus prompting the drastic action.

A company that had a for-profit account would likely not incur that much of a bill that quickly, so it wouldn't play out the same. I imagine there are a series of escalating collections steps, and the flag switch popped them right to the most extreme end.

Just a guess.

Not sure if this works out, from my understanding the $50k would not even remotely cover a hypothetical for-profit categorization (should only cover less than 500 annual users, while my understanding is that Hack Club is significantly larger, by some orders of magnitude).