[Bug] Context limit triggers billing/model upgrade prompt instead of auto-compacting

Bug Description
hit context limit, but instead of auto-compacting it forced me to either enable billed usage, or switch model (however, I can't upgrade to 1mil context cause i'm on the entry tier plan), asked another claude terminal on a different account what to do, which suggested /clear

that wiped out all session data then I spent a huge number of tokens and usage to get back up to speed on current session progress

expected result - session auto-compacts and continues

current result - session is in limbo and cannot continue without drastic action

model - default sonnet 4.6