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Most banks will exchange partially mutilated bills as a courtesy. They are then shipped away by the bank to be replaced. However, a distinction must be made between partially mutilated and actually mutilated. If the bill is partially mutilated: has been washed, torn, etc, most banks will take it for you. If the bill is truly mutilated: has been torn into tons of pieces, petrified, etc, it must be sent off by you where it will be officially examined and the true value will be determined by a specialist. Once they know, they will replace the money for you.

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Q: What bank takes partially mutilated money bills?
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