Kit is surprised, on returning home, to see the Garlands’ pony parked near his home. Mr. and Mrs. Garland have arrived to talk with Mrs. Nubbles, Kit’s mother, about the possibility of Kit’s coming to live with and work for them at a salary of six pounds a year. Kit and his mother agree to the arrangement. After the Garlands have departed, the two of them are talking of the great fortune that has come to Kit when Quilp and Dick Swiveller arrive. They inquire as to the whereabouts of Grandfather and Nell, but Mrs. Nubbles tells them that they have no idea where the old man and his granddaughter have gone. Quilp and Dick leave to go to a nearby tavern, where Dick relates his sorrows in the impending marriage of Sophy Wackles to Cheggs. Dick and Quilp drink curses to Cheggs in hopes that the marriage will fall through.

Kit and his mother spend the next day packing and repacking his belongings. Before he leaves, Kit warns his mother about being too heavily influenced by Little Bethel, the low-church chapel that she has taken to attending. He tells her that she is becoming too serious-minded, as is his little brother Jacob, who has taken to calling himself a “little sinner” and a “son of the devil.” Assuring his mother that he will visit whenever he comes to town, Kit takes off walking to the Garlands’ home, Abel Cottage, in nearby Finchley. At the door, he rings several times with no answer, until the servant girl, Barbara, arrives. She apologizes for not answering, stating that everyone is in the paddock trying to catch the pony. Kit goes out and grabs hold of him with little effort. He is shown his room, which he finds clean and comfortable, and is fed by Barbara as a welcome to Abel Cottage.

Quilp and Dick (who is slightly intoxicated) return to Tower Hill. Fred Trent has joined them, and Dick tells Quilp of his and Fred’s plan concerning Nell. The search is still on for Fred’s grandfather and sister. Quilp suspects that there might be some attraction between his wife and Fred, but he says nothing. They play cards, maliciously shutting out Mrs. Jiniwin, who is fond of the game. Quilp agrees to join Fred and Dick in their pursuit of Nell and her grandfather.

Nell and Grandfather escape the races successfully, but the old man is fearful of being followed, captured, and locked away. Nell is fearful too that she might be separated from her grandfather. They eventually come to a small village and ask the local schoolmaster where they can find lodgings. He shows them the schoolroom, on the wall of which are moral sayings copied in beautiful handwriting. He explains that they were done by his favorite pupil, who even now is wasting away in illness.