Regarding collection agencies and the return of the vehicle; If the fact that the work was done without consent was brought up and the vehicle was returned to the owner, I think that would basically nullify the point of their being any debt, and therefore nothing to collect on. If the police were involved and demanded that the mechanic return the vehicle, it would most likely be the same thing.
If the mechanic refused to return the car without payment, then you may have been able to hear their argment for why they thought payment was due and then been able to execute a chargeback ater paying to collect your vehicle.
If the slim possibility of the machanic letting the car go and then somehow reporting it as an unpaid debt took place, how would you expect the collection agency (who does not get involved for weeks, BTW) to get access to your social security number? Is your name so unique that your credit report can be acessed without a SS#, or did you somehow offer the SS# on the car intake form?
Lastly, I think it's safe to say that the claim of anyone's credit being destroyd by a disputed dept of $300 is somewhat histrionic. That's basically a small blip on a credit report. Not anything close to having it destroyed. If you were in process on closing on a loan or something of that nature, and your credit was on the cusp of being poor, I could possibly see the cause for concern.
In my opinion, you acted somewhat irrationally when there was a possibility of having this handled at the source. Making an attempt to handle the problem before rendering payment would in no way whatsoever put your credit score in any jeapordy.