For example, suppose the borrowed asset XYZ sharply skyrockets in price, causing a user's health factor to dip below 1, which means he is subject to liquidation. For the liquidator to be incentivised to liquidate the user, he needs to receive an attractive liquidation bonus in terms of the violator's lent assets. If there are simply not enough lent assets to back the bonus, a liquidator will choose not to liquidate. This leads to bad debts.