The US Treasury has a department of mutilated bills. If you have a mutilated bill, you can mail it to them and they will repair it and send it back to you free of charge or replace it with one of an equal value. What bills are considered mutilated? A bill that more than half of it is unreadable and its denomination is questionable. If your bill doesn't meet the definition of mutilated, you can just bring it to a local bank and they will replace it.
You can send your mutilated bills to the following address (via registered mail):
Bureau of Engraving and Printing
P.O. Box 37048
Washington, D. C. 20013