WASHINGTON—A group of Democratic lawmakers is proposing a bill that would make it easier for people who got rid of credit-card debt using bankruptcy to fix inaccurate credit reports that don't reflect they have earned a clean financial slate.

U.S. Sen. Sherrod Brown (D., Ohio) introduced a bill that would force major banks and other creditors to notify credit reporting firms when a person's debt has been canceled by a bankruptcy judge. It would also punish creditors that ignore a borrower's request to fix an inaccurate record, giving borrowers the power to sue for damages.

The bill, called the Consumer Reporting Fairness Act of 2015, comes after several borrowers have sued several big banks, accusing them of letting poor marks for unpaid debt remain on their credit reports even after the debt was canceled in bankruptcy.

According to federal lawsuits filed by borrowers, a bank's failure to fix the credit-reporting records hurt their credit scores and made it tougher to get a job, find an apartment and borrow money at a low interest rate. In one case, a New York resident who applied to live in a low-income housing apartment was denied "because of delinquent debts" on his credit report, according to sworn testimony provided to the court.

"This bill would ensure that debts prior to bankruptcy aren't in effect double counted and don't continue to make it difficult for consumers to get a job or secure a loan for a home," Mr. Brown said.

Specifically, the proposed changes to U.S. bankruptcy law would clear up confusion in the rise of consumer-debt trading among banks and debt collectors.

Banks often sell the right to collect on credit-card accounts to debt collectors, especially if borrowers seem unlikely to pay them. But no law explicitly requires the banks to reach out to credit-reporting firms to change the status of a debt from "charged off" to "discharged in bankruptcy" once the debt has been sold.

The law also would give credit-card borrowers who have inaccurate credit reports after bankruptcy the power to sue banks and third-party debt buyers over those reports. Under existing credit-reporting laws, a borrower doesn't have the power to sue a bank or other creditor over an inaccurate piece of information sent to a credit-reporting firm.

"It's a really good incentive for companies to clean up their act," said Dalié Jimé nez, a University of Connecticut law professor, adding that the ability to sue for attorneys' fees on top of damages means that consumers could have an easier time finding a lawyer to represent them.

Several other lawmakers—all Democrats—have signed onto the bill, including Sens. Richard Blumenthal (D., Conn.), Dick Durbin (D., Ill.), Al Franken (D., Minn.) and Jeff Merkley (D., Ore.).

"Every consumer should have a credit score that accurately reflects how creditworthy they are," said Mr. Franken.

Filing for chapter 7 protection gives borrowers a fresh start when a judge cancels their debts, aside from exceptions such as student loans and tax debt, with a discharge. More than 600,000 people and couples filed for chapter 7 protection last year, according to the Administrative Office of the U.S. Courts.

The issue has ensnared the country's biggest banks—including Bank of America Corp., General Electric's Synchrony Bank and Citigroup Inc.—each of which has been sued by borrowers who said they had inaccurate credit reports. The banks have denied wrongdoing.

Earlier this month, J.P. Morgan Chase & Co. agreed to pay $136 million and overhaul debt sales after state and federal authorities investigated the way it collects and sells credit-card debt. The Consumer Financial Protection Bureau, along with 47 states and Washington, D.C., said they found that J.P. Morgan sold "zombie debts" to third-party debt buyers which include accounts that were inaccurate or in some way not collectible.

J.P. Morgan Chase didn't admit or deny allegations that it harmed consumers by allegedly making errors in hundreds of thousands of debt-collection lawsuits.

Emily Glazer contributed to this article.

Write to Katy Stech at katherine.stech@wsj.com

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