In this paper, we study the relationship between crack nucleation and failure of an interface reinforced by chains and the results of a linear stability analysis presented in part 1 of this study (preceding paper in this issue). We develop a numerical procedure to simulate the deformation and failure of such an interface. We demonstrate that instabilities lead to spatial localization of the deformation which determines the failure mode of the interface. The dependence of the failure modes on the material parameters of the system, such as the number of entanglements of the pull-out chains, the level of applied load, and the amplitude of the initial perturbation, is studied.