Whenever there is an error on your credit report, you should use the credit reporting agency's dispute procedure to clear it up. Write to the agency which has the incorrect info and provide any supporting documentation.
There are sample letters and an outline of the dispute process available on the Federal Trade Commission website (www.ftc.gov).
My response to this question does not create an attorney-client relationship and does not consitute legal advice. The information is provided as a courtesy only. This format of written question and answer is too informal and lacks sufficient detail. It is almost never possible to give quality legal advice without a full set of facts and the opporutnity to have a dialog where questions are asked and answered. Moveover, posters on the internet should be aware that confidentiality is not guaranteed online. I am licensed to practice law in WI and IN.
You have to get with an attorney right away to see if that 1099 is valid as well. Title 15 USC 1641 of the Federal Statutes governs Fair Debt Collection Practices Act and your state may have individual adoptions of this language. I would demand strict proof of this debt from the party filing that on your credit report.
NOT LEGAL ADVICE--FOR EDUCATIONAL PURPOSES ONLY. We don't know the facts and this is not legal advice. Seek the advice of licensed property law attorneys immediately so they can secure your rights. Hiring an attorney is a serious and important decision. Please ensure that you take the time necessary to evaluate and interview more than one attorney to determine whom to hire.