After the furmity woman's revelation, Henchard's fortunes and esteem diminish rapidly. One of his heavy debtors fails and bad judgment by one of his employees causes a serious financial loss. Bankruptcy proceedings are instituted against Henchard in which his creditors take possession of all his property. He is at his lowest point: "The black hair and whiskers were the same as ever, but a film of ash was over the rest." At the proceedings, Henchard offers his remaining property, the loose change in his money-bag, and his gold watch. The creditors refuse to take these last remaining possessions, but instead praise him for his extraordinary honesty in giving over all his worldly goods. Much affected, Henchard leaves, sells his watch for the first offer, and brings the cash to one of his minor creditors.
Henchard moves to Jopp's cottage by Priory Mill. Elizabeth-Jane, moved to compassion by his terrible downfall, attempts to see him. However, Henchard is at home to no one, including Elizabeth-Jane. After an unsuccessful attempt to see her stepfather, Elizabeth-Jane passes by Henchard's former place of business. She learns that Donald Farfrae has bought the property and taken over all of Henchard's employees. Though the salary is slightly lower, the men are happy with Farfrae's working conditions. Furthermore, whereas Henchard's business had been conducted by rule-of-thumb procedures, Donald has instituted sound business techniques and modern innovations.
Henchard's rapid decline in fortune and prestige is as complete as Donald Farfrae's rise. Elizabeth-Jane is more alone now than she has ever been. All the elements have conspired to reverse the positions of the characters, and Farfrae has won out completely, even in love.
An odd note is sounded by the curious alliance that Henchard maintains with Jopp. There is certainly no friendship between the two men, since Henchard blamed Jopp for allowing him to speculate on the weather, and Jopp despises Henchard for dismissing him. The one connective would be their mutual hatred for Donald Farfrae. One gets the feeling that Jopp has taken in Henchard for the purpose of taunting him with his failure, and that Henchard is using Jopp as a scourge. Given Henchard's compulsion to do the self-destructive thing, there is an ironic justice in his identification with the village's most conspicuous failure.
One of the creditors is a "reserved young man named Boldwood." Boldwood is an important character in Hardy's much earlier novel, Far from the Madding Crowd.