diff --git a/src/protocols/bdx/AsyncTransferFacilitator.cpp b/src/protocols/bdx/AsyncTransferFacilitator.cpp
index 2e3a0f03794319..51bd0fd51e27ba 100644
--- a/src/protocols/bdx/AsyncTransferFacilitator.cpp
+++ b/src/protocols/bdx/AsyncTransferFacilitator.cpp
@@ -63,6 +63,17 @@ void AsyncTransferFacilitator::ProcessOutputEvents()
     mTransfer.GetNextAction(outEvent);
     while (outEvent.EventType != TransferSession::OutputEventType::kNone)
     {
+
+        // If the transfer session state machine generates an event of type TransferSession::OutputEventType::kInternalError,
+        // indicating that the session is in a bad state, it will keep doing that thereafter.
+        //
+        // So stop trying to process events, and go ahead and destroy ourselves to clean up the transfer.
+        if (outEvent.EventType == TransferSession::OutputEventType::kInternalError)
+        {
+            mDestroySelfAfterProcessingEvents = true;
+            break;
+        }
+
         if (outEvent.EventType == TransferSession::OutputEventType::kMsgToSend)
         {
             CHIP_ERROR err = SendMessage(outEvent.msgTypeData, outEvent.MsgData);
@@ -170,21 +181,20 @@ void AsyncResponder::NotifyEventHandled(const TransferSession::OutputEventType e
     ChipLogDetail(BDX, "NotifyEventHandled : Event %s Error %" CHIP_ERROR_FORMAT,
                   TransferSession::OutputEvent::TypeToString(eventType), status.Format());
 
-    // If this is the end of the transfer (whether a clean end, or some sort of error condition), ensure that
-    // we destroy ourselves after processing any output events that might have been generated by
-    // the transfer session to handle end-of-transfer (e.g. in some error conditions it might want to send
-    // out a status report).
+    // If this is the end of the transfer (whether a clean end, or some sort of error condition), ensure
+    // that we destroy ourselves after unwinding the processing loop in the ProcessOutputEvents API.
+    // We can ignore the status for these messages since the state machine is in a bad, unrecoverable
+    // state and we should stop processing events and clean up.
     if (eventType == TransferSession::OutputEventType::kAckEOFReceived ||
+        eventType == TransferSession::OutputEventType::kStatusReceived ||
         eventType == TransferSession::OutputEventType::kInternalError ||
-        eventType == TransferSession::OutputEventType::kTransferTimeout ||
-        eventType == TransferSession::OutputEventType::kStatusReceived)
+        eventType == TransferSession::OutputEventType::kTransferTimeout)
     {
         mDestroySelfAfterProcessingEvents = true;
     }
-
     // If there was an error handling the output event, this should notify the transfer object to abort transfer so it can send a
     // status report across the exchange when we call ProcessOutputEvents below.
-    if (status != CHIP_NO_ERROR)
+    else if (status != CHIP_NO_ERROR)
     {
         mTransfer.AbortTransfer(GetBdxStatusCodeFromChipError(status));
     }
diff --git a/src/protocols/bdx/AsyncTransferFacilitator.h b/src/protocols/bdx/AsyncTransferFacilitator.h
index 1ad95d39e98d2d..39f87b741160c9 100644
--- a/src/protocols/bdx/AsyncTransferFacilitator.h
+++ b/src/protocols/bdx/AsyncTransferFacilitator.h
@@ -72,7 +72,11 @@ class AsyncTransferFacilitator : public Messaging::ExchangeDelegate
      */
     virtual void DestroySelf() = 0;
 
-    // Calling ProcessOutputEvents can destroy this object before the call returns.
+    /**
+     * Calling ProcessOutputEvents can destroy this object before the call returns for certain cases
+     * where the state machine either receives a message indicating termination of the transfer session
+     * or some error cases where the state machine goes to a bad, unrecoverable state.
+     */
     void ProcessOutputEvents();
 
     // The transfer session corresponding to this AsyncTransferFacilitator object.