Unfair? How can I fix this?

State of Missouri:
Purchased car from local small dealer. Car would not pass inspection, found out car had not been inspected according to Mo. law must be done on lot before selling, turned in to state, took car back informed company financing it. This company went under, now I just found out this has been placed on my credit report as a bad debt by this local dealer.
I need some help! Credit is bad enough from ex's non-payment of medical bills, and child support, so my dollars don't stretch far enough to recover ! NOW THIS!
Teacher, mother of three young men I have raised with crummy credit. Need inexpensive idea to do about this!
THANKS FOR ANY HELP!!

I am a law school graduate. What I offer is mere information, not to be construed as forming an attorney client relationship.

Very simple: contact consumer credit counseling service in your area: they are free.

Ask them to help you clean up your credit, especially with this bogus charge.?

How. In addition to their help, contact all 3 credit reporting agencies and get them to do an investigation. Give them all paperwork in relation to the bogus inspection, company going under, etc. as you can.
www.experian.com www.transunion.com www.equifax.com

At the same time as the above two, contact the better business bureau in your county and begin an investigation through them.

They can be located at www.bbb.com.