What exactly are you embroidering? Cotton fabric with a stabilizer, or a quilt sandwich with cotton batting? If it's just cotton fabric, are you sure that you are using the correct needle and it's inserted all the way up? If your needle is a bit too long (wrong brand) or not inserted properly, it could be catching on the fabric as it goes back and forth shredding it. This can also cause the needle to bend. If you are doing a quilt sandwich, the batting might have tiny bits of seed or denser bits that are being caught by the needle & pulled thru the fabric. I would try a different brand of batting.
Finally, I would take an unembroidered sample to your dealer and have them hoop & embroider it to see if they can figure out what's wrong.