Since Mrs. Mantalini is still in bed, Miss La Creevy gives the message to Miss Knag. The forewoman says she wouldn’t care if Kate stayed away for good. Miss La Creevy tells Miss Knag she isn’t the owner, so her feelings are not important.
When she returns home to have tea, Nicholas visits her. He tells her he wishes to confront his uncle, who has tricked him. He tried to see him earlier, but Ralph had already gone out. He knows his uncle plans on telling his family about the allegations against him. He wants Miss La Creevy to tell them of his impending visit.
When Miss La Creevy arrives, though, she finds that Ralph Nickleby is already there and has delivered the news about Nicholas to his family. Mrs. Nickleby and Kate are in tears. Kate doesn’t believe the allegations. Her uncle, though, does. He says it is his duty to deliver Nicholas to justice, but he will not in respect to Kate’s feelings. Kate realizes this is a form of blackmail. As long as she doesn’t speak of the prior night’s incident, he won’t turn in Nicholas.
Nicholas arrives and denounces Fanny Squeers’ letter as a lie. He accuses Ralph of purposely sending him to a place where children are mistreated. Nicholas admits he attacked Squeers to save another child, and he doesn’t regret it.
As to the ring, Nicholas says that Mrs. Squeers must have dropped it into his clothes when she was struggling with one of the children. He has since returned it by coach. The boy he rescued is still with him, but he has no intention of letting him be taken back to that school.
Ralph tells the family he made no promises. He never had much hopes for Nicholas, but he gave him an opportunity. He will not help Nicholas further, nor will he help those that assist him. Mrs. Nickleby apologizes for what has happened, but she can’t renounce her son—even if he is guilty. Kate is incensed that her mother does believe in his guilt.
Nicholas plans to leave, but Kate begs him not to. He tells her he cannot help or protect them. Nicholas tells Ralph that he leaves his mother and sister in his care, but if he wrongs them, he will pay for it dearly.
It pains Nicholas to leave his family, but it is for the best. When he gets home, he cries. Smike enters. He tells Nicholas he tried to leave him, for he knows that Nicholas cannot afford to keep him. However, he couldn’t leave without a final word. Nicholas tells Smike he is his only friend. He doesn’t care if they are poor as long as they are together.