In George’s shooting gallery, George is shocked to receive a letter from Mr. Smallweed which asks for the full repayment of his debt. George asks Phil what he makes of it and Phil says that this is always the way in matters of money. George replies indignantly that he has paid off his debt and that, now, he is only paying interest. Phil, who is currently painting the wall white, suggests that George “whitewash” the business, but George says that to do this would bankrupt the Bagnets, which he would never do.
Mr. Smallweed suddenly pulls out of his prior agreement with George and calls in George’s debt. Although this is an unpleasant thing to do, legally Mr. Smallweed has the upper hand. This suggests that the laws surrounding debt and interest need reforms. Phil suggests that George should ignore the letter, but the Bagnets have provided George with the security to borrow money, and they will have to pay if George does not.
Midway through this conversation, they hear footsteps in the hall, and Mr. and Mrs. Bagnet appear at the entrance of the gallery. Mrs. Bagnet greets George warmly; they have come to sign the security on George’s debt, which is due to be renewed as usual. Mrs. Bagnet remarks that George looks pale and George uncomfortably explains that his request for renewal has been rejected. Mrs. Bagnet is horrified and wishes that George had thought of her and the children in his careless lifestyle.
The Bagnets have agreed to take responsibility for George’s debt because they trust that he can pay it back and will not need to make use of their offer. They are shocked to find that George is in difficulty with the repayments, and Mrs. Bagnet worries that they will have to repay the full amount.
George is distraught to have let his friends down and hopes that the issue can be resolved. He only just received the letter, he explains, and is just about to go to see Mr. Smallweed. Mrs. Bagnet quickly forgives George and admits that she knows he would never trouble them on purpose. Mr. Bagnet advises that George should see Mr. Smallweed immediately, and George agrees and sets out with Mr. Bagnet. As the men walk to Mount Pleasant together, they earnestly discuss the many merits of Mrs. Bagnet.
A truly honorable man, George does not want the Bagnets to think that he has known this for a long time or has used them in any way. He does not expect them to pay his debt and wants to find another way to resolve the situation.
They arrive at Mr. Smallweed’s, and Judy sneers at them as they enter. Mr. Smallweed is perched in his usual seat and greets the two ex-soldiers with a leer. George asks for his pipe and asks Mr. Smallweed why “his friend in the city” has sent him this letter when he knows that Mr. Bagnet cannot pay. Mr. Smallweed snaps that he does not know Mr. Bagnet cannot pay and George remarks that Mr. Smallweed is in a very shrill good mood which seems somehow sinister in intent.
Mr. Smallweed mocks George and seems to feel that he has triumphed over the trooper in some way. George is naïve and expects Mr. Smallweed to treat him fairly. Mr. Smallweed is a horrible man, however, and delights in getting one over on people.
George insists that he wants to resolve the dispute amicably and to renew his debt, as he always has before. Mr. Smallweed’s joking manner suddenly evaporates and he snarls at George that he will “crush” and “destroy him” if the debt is not paid. Astounded, George and Mr. Bagnet glance at one another and leave the Smallweed’s house as Mr. Smallweed calls for Judy to throw them out.
Mr. Smallweed shows George his true colors and reveals that he has always despised the trooper and wished to end him. Mr. Smallweed does not have any special reason to hold a grudge against George—he is just a bitter, miserly old man who hates everyone.
Once outside, George and Mr. Bagnet solemnly pace together. They agree to visit Mr. Tulkinghorn, but, when they arrive, his clerk tells them that he is with a client and will not see them. George and Mr. Bagnet wait in the hall and George leans gloomily against the fireplace. Eventually, Mr. Tulkinghorn’s client, who is Mrs. Rouncewell, exits his chamber. George does not turn around as she goes past, but she notices Mr. Bagnet’s military bearing and timidly explains that she had a son who joined the army. Mr. Bagnet speaks politely with her for a moment before she goes on her way.
It seems that George does not turn around because he is ashamed of the tight circumstances he’s found himself in and does not wish to be seen by anyone.
Mr. Bagnet tries to cheer George up, and the clerk goes into Mr. Tulkinghorn’s office again to tell him that they are still outside. They are admitted and Mr. Tulkinghorn asks George why he has come back when he is not welcome. George explains the situation, but Mr. Tulkinghorn coldly replies that George must pay his debts and, if he or Mr. Bagnet cannot, they must suffer the consequences. George says that he cannot do this, because it implicates his good friends, and so he tells Mr. Tulkinghorn that he will give him the sample of Captain Hawdon’s handwriting.
George trades Captain Hawdon’s handwriting—the only semblance of leverage he has—for Mr. Tulkinghorn’s cooperation. He is very unhappy about this because he hates to be disloyal to his friends.
Mr. Tulkinghorn says that, if George chooses to do this, he will write a document which frees Mr. Bagnet from all obligations connected with the debt. George immediately agrees and pulls the letter from his pocket. It is nothing but a list of instructions, sent to him by Captain Hawdon. Mr. Tulkinghorn takes the letter, but his face does not reveal if he is pleased or disappointed, and he quickly sends the men away.
Mr. Tulkinghorn accepts George’s offer—despite his earlier show of indifference, it seems that Mr. Tulkinghorn really did need this handwriting sample from George. Mr. Tulkinghorn gives no outward sign to suggest that he is pleased to take the letter.
George has dinner with the Bagnets, but he is not his usual cheerful self and even Malta and Quebec’s playful attention cannot raise his spirits. Mrs. Bagnet worries that he has taken her rebuke to heart, but George assures her that he deserves it. Before he leaves them, George calls Woolwich over and tells him to take care of his mother as he grows up. He then leaves before he has smoked his usual pipe with his friends.
While many of the novel’s characters are quick to sabotage others to help themselves, George is far too honorable and loyal to drag the Bagnets down with him. He’s also willing to shoulder the blame, as seen in his conversation with Mrs. Bagnet. George’s advice to Woolwich suggests that he sees Mrs. Bagnet as a mother figure, and it also hints that George perhaps didn’t take care of his mother.