Locally encrypt Dropbox folder

you can simply turn on bit locker encryption for the drive in which dropbox resides (if bitlocker is available atall with your version of windows 7 or you may try truecrypt) this way you will have a second layer of protection not only for the files in dropbox(local) but also other files in windows 7.this scrambles the data making it meaningless to anybody without a proper key.

and if you like you may use this link to add an extra layer of security to yor dropbx (online). better safe than sorry.

Switch your concept: First the encrypted folder, then the synced dropbox folder.

What you want is a Truecrypt folder, lets say D:\Non-encryptedfolder. All files inside that folder are encrypted and not viewable without a password. When someone stole your hard drive, he cannot just mount the drive and see your dropbox files.

Inside this TrueCrypt folder you save your Dropbox folder e.g D:\Non-encryptedfolder\Dropbox. After you have logged on, TrueCrypt de-crypts your Dropbox folder and so the Dropbox application sees all files without any encryption. This way, the synced online files are also non-encrypted.

BitLocker only encrypts the local copy. When the DropBox sync client goes to read the file, it's decrypted before DropBox can "see it", so the encrypted version is not transmitted to DropBox.

On a side note for anyone reading this, to expand and clarify the reasoning for using BitLocker (Windows Encryption). If you're not using any file encryption, an attacker could remove your Windows password (easy to do with the right tools) or mount your drive in another system and gain full access to your files without needing your account information. By using BitLocker, you defend against said actions and can still easily access your files without a ton of extra work.

Encrypting your files with an application like Veracrypt is in most cases way overboard and required both a lot of extra work and a lot of bandwidth as Dropbox and other cloud storage systems will have to download the entire container with every change. Veracrypt is a great tool but when dealing with files that don't require that kind of security it is overkill to use it. Bitlocker works just fine for protecting your files on your Windows OS.