The Washington Bullets, needing a victory badly, fell apart when tonight's game was on the line, shattering their confidence and severly damaging their playoff hopes.

The Indiana Pacers, one of the teams the Bullets are struggling to catch to get into the playoffs, outscored them, 20-2, at the end of the third period and the beginning of the fourth and rolled to a convincing 134-104 victory at Market Square Arena.

The defeat was the Bullets' ninth in their last 12 games and dropped them to 23-30.

Playing without forward Bob Dandridge, who was left home with a pulled calf muscle, and in foul trouble most of the night, the Bullets stayed close for most of the first three quarters.

Washington's early success came in part to the play of John Williamson, playing in a Bullet uniform for the first time after joining the team Wednesday in a trade with the New Jersey Nets for Roger Phegley. Williamson finished with 12 points.

The Bullets were down by only a point at 83-82, with 2:04 left in the third period. Then suddenly they looked tired, bewildered and lost.

Billy Knight, who led the Pacers with 33 points and 14 rebounds, had 12 of Indiana's 20 points in the spurt that put away the Bullets.

The Bullets were led by Greg Ballard's 22 points, but he injured both his right foot and his left thumb late in the game and may not play Friday night in Milwaukee against the Bucks.

Indiana reserve John Kuester stepped on Ballard's foot with 44 seconds to play and Dudley Bradley accidentally twisted Ballard's thumb as both grabbed at a loose ball.

"I'm more concerned about my thumb than I am about my foot," Ballard said.

Coach Dick Motta and General Manager Bob Ferry, who is accompanying the team on this seven-game trip, are concerned about the whole team.

The Bullets aren't playing well, and are running out of time. They are eighth best in the Eastern Conference and only six teams make the playoffs.

Dave Corzine fouled out and Wes Unself and Jim Cleamons each had five fouls as the Bullets committed 37 for the game.

Indiana, which made 41 of 54 free throws, sank 19 in the third period.

"Everyone got into foul trouble," said Motta. We played about as good as we can up to that point."

The Pacers received 22 points and 12 rebounds from Mickey Johnson and 19 points and 11 rebounds from George McGinnis as they broke a three-game losing streak.

The big man, however, was Knight. The 6-foot-6 guard posted either Kevin Grevey or Williamson and scored easily. He made 11 of 18 shots, 11 of 13 free throws.

Williamson scored 10 points in the second quarter and helped his team take a 53-48 lead with 2:29 left in the half. Washington didn't score again before intermission, though.

McGinnis scored four straight points, Knight put in a layup with three seconds left and an alert Johnny David stripped the ball from Grevey and hit a 17-footer at the buzzer to give the Pacers a 56-53 lead.

Still, the Bullets were down by only one when disaster struck in the third period.

Knight scored eight points in the last two minutes of the quarter, while all the Bullets could come up with was a layup by Williamson.

Now ahead, 91-84, the Pacers started the fourth quarter with a 12-0 spurt and the Bullets never recovered. Knight and Bradley each had four points in that burst.

The rest of the game was run-and-shoot time and the Pacers were better at that, too.

"It was pathetic," said Elvin Hayes. "We played them even and then all of a sudden we're out of the ball game. I thought we were playing with intensity, but we just don't have the depth to withstand foul trouble."

With Dandridge absent and most of his front line in foul trouble. Motta played Mitch Kupchak 22 minutes tonight.He responded with 10 points and seven rebounds.

The coach also was forced to use Grevey extensively at forward Grevey had 21 points, but most came while he was at guard.

If Ballard is unable to play against Milwaukee, Motta said, Kupchak would start at small forward with Grevey his backup. The Bucks' small forward, Marques Johnson, is a hard man for anyone to defend against.

"It looks like I'm back to the Bermuda Triangle," said Grevey.

The Pacers had an impressive 64 rebounds and 32 assists tonight in recording their largest margin of victory this season when they have beaten the Bullets four out of five times.

Former Bullet guard Phil Chenier is having more back problems and was not in uniform.