Is a bankruptcy greater than >10 years ago statistically a red flag? What do you think would be a better term?

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.