One of the hottest government publications around is a 21-page summary of the ins and outs of bank failure. Titled, appropriately enough, When a Bank Fails, the publication responds to questions often asked by depositors and borrowers in these days of increasing bank failures.

The Federal Deposit Insurance Corp., which insures bank deposits (and which authored the pamphlet), recently counted 1,208 "problem" banks in the United States -- more than five times 1981's level. Most are small, and many are in farm or energy-producing states. But at least some large institutions from other regions are on the problem list. While in the past only about 10% of such banks have gone out of business, 120 isn't a number to be sneezed at.

So what does happen when a bank slams its door?

Thanks to the insurance, the FDIC notes, a depositor is completely protected up to $100,000. But a borrower's fate is tied to his prior performance. If the borrower is current on his loans, the original loan agreements remain in effect whether those assets are purchased by another bank or managed by the FDIC itself. From a cash-flow standpoint, therefore, there's no change. A delinquent borrower, on the other hand, will be required to work out a payment schedule that puts payments on a current basis. And the FDIC has the power to ask for new collateral or additional cosigners.

In short, no borrower is off the hook when a bank goes out of business. "People who think things are forgiven are dreaming," says an FDIC spokesman with a chortle.