In the second-season premiere, following her breakup with Steve, Fiona lands a job tending bar at a popular local joint and makes a new acquaintance in an enterprising young businessman. Meanwhile, Frank uses Liam as collateral for a gambling debt; Lip takes bets on Little League games; and Kash leaves town, so Ian decides to take over the Kash and Grab.
Frank spots a potential sugar momma in a bar patron named Dottie, whose health is failing fast but is living well on a city pension. Meanwhile, Fiona has her hands full with a new job tending bar, the kids and the new man in her life; and at home, Debbie wants a room of her own while Carl beds down in a van.
Fiona ponders the morality of getting involved with a high-school crush who's now married; Frank pulls out all the stops in an effort to stay in the good graces of his meal ticket, Dottie; and Harry's health issues leave Debbie obsessing over death. Meanwhile, Kevin considers buying the Alibi; Lip takes a meeting with an Army officer to see about getting Ian into West Point; Jody asks for Frank's permission to marry Karen.
After sleeping with Craig, Fiona is unprepared for the arrival of his irate wife. And on the family front, Fiona is concerned that she is dumping too much responsibility on the Gallagher children when stress causes Debbie to break out in a rash. Meanwhile, Frank begins to suspect his days in the Jackson household are coming to an end; Ian marches forward in his efforts to get into West Point; and Lip attempts to dig up dirt on Jody.
When Eddie Jackson's body turns up, Frank thinks he should be in line to claim his pension and insurance benefits. Meanwhile, Fiona attends a high-class wedding with her sugar daddy; Lip discovers startling news about Karen and Jody; Frank's room is rented to a hooker; Veronica suspects Kev of cheating; and Sheila uncovers the truth about what transpired between Frank and Karen last year.
Debbie's day at day care takes a wild turn with the arrival of Grammy Gallagher, who's been released on a medical furlough. She seeks Frank's help in tracking down her old meth-lab pal who owes her a big debt. Meanwhile, Steve invites Fiona and Adam on a double date with him and his Brazilian bombshell; and when Frank finds out the beneficiary of Eddie's life-insurance policy, he hits the roof.
Jasmine throws an end-of-summer blowout and invites Fiona down to David's boat but neglects to inform her that Steve and Estefania will also be on board; Lip tries to get back into Karen's good graces and prepares a prenup for her and Jody. Meanwhile, the Ian and Lip impasse heats up into a physical confrontation; Frank tires of doing Grammy's bidding and wants her out, but Fiona is enjoying the old girl's company.
While Jody and Sheila comfort a dying Grammy, Frank steps out and stops at the Kash and Grab, where he walks in on Ian and Mickey in a compromising position. Meanwhile, Lip wants to quit school, but Fiona tells him that if he reconsiders, she'll go back and get her GED; Lip takes Karen to a number of adoption agencies and doesn't like what she has planned; Steve decides to coach Carl's football team.
Monica blows back into town and immediately hooks up with Frank for more shenanigans, but the kids are left wondering if she's finally here to stay, and Frank is eager to pick up the ashes of his late mother and reclaim the cash he believes she's hidden. Meanwhile, after Fiona kicks out Lip, he kicks around with stops at Karen's and Steve's. Later, Sheila and Jody think the house is haunted by Eddie's ghost.
With Monica around and pitching in, Fiona is able to devote more time to pursuing her GED and seek a promotion at the club; Steve learns Estefania is still in love with her ex-boyfriend, so he and Lip conspire to sneak her beau back into the country. Meanwhile, Ian is busy dodging a vengeful Terry Milkovich; and Lip ponders the possibility that he might be poppa to Mandy's impending arrival.
Fiona's Thanksgiving plans get put on the back burner when Frank tries to get Monica out of bed and help her out of her depression. Meanwhile, Estefania and Marco's rocky reunion takes a turn for the better when Steve offers to surrender his identity so Marco can stay in the country and marry. Later, Karen goes into labor; and Debbie worries that depression may run in the Gallagher family.
Jimmy gets back into Fiona's good graces and decides to have her meet his family; Frank plots to free Monica from the psychiatric institution; and Jody and Sheila attempt to hide Karen's newborn in the second-season finale. Later, Ian runs into the guy he slept with; and the late Eddie's long-awaited insurance check arrives.