It's Halloween and SpongeBob tries to scare some kids as "The Flying Dutchman," but the kids just laugh at his silly costume. SpongeBob gets Patrick to shave his head round, so he will look more like a ghost. He goes to the Krusty Krab to show off his costume, but everyone is more afraid of what is inside the costume.

SpongeBob and Patrick play a pirate board game based on a real treasure map. Mr. Krabs joins in and wins a bunch of times in a row. The next day, Mr. Krabs takes the two boys on a treasure hunt, but they find out later that Mr. Krabs is using the game as a map, and is going crazy trying to find the Flying Dutchman's treasure.

SpongeBob forgets how to tie his shoes, so he must re-learn how. But no one else knows how, either.

When a giant anchor falls onto SpongeBob's house, Squidward, SpongeBob and Patrick decide to climb the anchor, and they find the boat of the Flying Dutchman, who imprisons them.

After Mr. Krabs eats a rotten Krabby Patty to save money, he ends up hospitalized for food poisoning and bargains with the Flying Dutchman for his soul, leading him to second-guess his cheap and miserly ways.

The Flying Dutchman takes up residence at SpongeBob's house where he proceeds to scare, startle and surprise SpongeBob around the clock. Eventually all the spooky shenanigans grow old, and SpongeBob is no longer afraid of the Dutchman. This creates a panic for the old ghost who now fears that he has lost his scary touch. So SpongeBob decides to lend a hand and help the Flying Dutchman learn to scare people again.