"Egregious" implies that it's unreasonable. Can you say more on that?
Lenders are forced to use the government's criteria to determine when to loan out their money.
Someone could be abusing the system and declaring bankruptcy every 10.5 years, like clockwork, and the bank would have to keep taking them back as a customer.
The government has several interests, beyond lenders. The government enforces the lenders abilities to claim debts. It is also in the government's interest to allow people to get back on their feet if their finances crater, because taking someone out of the financial system indefinitely is not productive.
Someone, somewhere, could be abusing any system. That, in and of itself, is not a disqualifying feature of a system.
I think the banks themselves should be allowed to decide when the risk is worth taking. It will all be determined by actuarial tables like every other similar business decision.
If the risk of someone defaulting 15 years after bankruptcy is 20% higher, then banks may charge that person 20% more interest.
I'm curious as to why you're focusing on bankruptcy, when there are a significant amount of other signals banks use, which do not age off in the same way.