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We're back in New York, two weeks after Lily's return from Europe. Mrs. Peniston has died, and everyone has gathered to hear the reading of her will. Her estate, valued at about four hundred thousand dollars, is assumed to be left to Lily.
Unfortunately for our protagonist, Mrs. Peniston, having heard of Lily's scandalous break with Bertha (and the rumors of her affair with George), leaves only ten thousand dollars to her, and the rest to Grace Stepney.
Lily is shocked but manages to keep herself under control, say something nice to Grace, and watch as the crowd of social elite leaves the room with the now-rich Grace. Lily remains alone with Gerty Farish, realizing that she's now completely insignificant to the People Who Matter.
Lily and Gerty go back to Gerty's place, mostly because Lily has no other place to go. She finds it amusing that her legacy from her aunt is only a thousand bucks more than the nine grand she owes Trenor.
Gerty is firmly on Lily's side. She thinks it's ridiculous that Grace got the inheritance, as she certainly didn't have any "right" to the money.
Lily is almost able to laugh at her situation because she realizes she's completely, completely screwed. She knows that it's easier for society to believe Bertha's version of the story than her own, because Bertha is loaded and Lily has nothing to her name at this point.
Still, she doesn't seem angry, and she's not blaming Bertha or anyone else for her current situation. "It's in my blood," she says, meaning it was her upbringing to require luxury and be dependent on things like appearances and reputation.
It's now the last week in June, and Lily is staying at a hotel in New York. She recounts recent events: after Bertha turned her off the yacht, Lily made plans to return to New York. Unfortunately, she got there too late, and news of the break with the Dorsets had already reached the social circles in the city.
Rather than defend herself by telling the truth, Lily merely accepted what had happened. She muses that a feeling of "half pride and half humiliation" kept her from trying to bring the real story to light.
She knows that it was her job to distract George from Bertha's affair, that she was required to perform that service in order to earn the right to live in luxury aboard the Sabrina.
Lily now knows that her goal is to regain her social position in New York, and she's hoping that Mrs. Trenor can help her do that.
One day, out to lunch with Gerty, Lily does indeed spot Mrs. Trenor, out with Mrs. Fisher, Mr. Trenor, Simon Rosedale, and others. Lily has been waiting for such an "accidental encounter" to re-instill herself in Mrs. Trenor's good graces, but Mrs. Trenor gives her the cold shoulder.
This greatly concerns Lily, since "where Judy Trenor [leads], all the world [will] follow."
She suddenly remembers how much Mrs. Trenor always disliked Mrs. Fisher's mooching off her husband, financially. Lily realizes that Mrs. Trenor isn't jealous of her husband's affections – only his wallet.
Lily immediately commits herself to paying Gus back the nine thousand, just as soon as she gets her legacy from Aunt Peniston's will. She realizes that, with that inheritance gone, all she will have to live on is a very small income – even less than Gerty Farish.
Another problem is the delay in getting the cash from the will. Apparently it's going to take a year for the lawyers to sort out the details, which leaves Lily high and dry in the meantime. She realizes she'll have to ask Grace Stepney to loan her the ten thousand ahead of time.
So, Lily goes to Mrs. Peniston's former house to see Grace. Grace is mourning over Mrs. Peniston's death, and tells Lily that she herself is in the same position – she hasn't yet received her own (much larger) inheritance.
Lily asks if Grace could borrow the money on Lily's behalf, but Grace refuses. Mrs. Peniston hated the idea of debt, and in fact it was the news of Lily's own debts that made her so ill and probably caused her death. Grace wouldn't dare to disgrace her memory by taking on a debt for the inheritance.