diff --git a/contractcourt/channel_arbitrator.go b/contractcourt/channel_arbitrator.go
index 93f369258..9008894f7 100644
--- a/contractcourt/channel_arbitrator.go
+++ b/contractcourt/channel_arbitrator.go
@@ -1316,6 +1316,15 @@ func (c *ChannelArbitrator) checkCommitChainActions(height uint32,
 	// either learn of it eventually from the outgoing HTLC, or the sender
 	// will timeout the HTLC.
 	for _, htlc := range htlcs.incomingHTLCs {
+		// If the HTLC is dust, there is no action to be taken.
+		if htlc.OutputIndex < 0 {
+			log.Debugf("ChannelArbitrator(%v): no resolution "+
+				"needed for incoming dust htlc=%x",
+				c.cfg.ChanPoint, htlc.RHash[:])
+
+			continue
+		}
+
 		log.Tracef("ChannelArbitrator(%v): watching chain to decide "+
 			"action for incoming htlc=%x", c.cfg.ChanPoint,
 			htlc.RHash[:])
@@ -1871,8 +1880,8 @@ func (c *ChannelArbitrator) resolveContract(currentContract ContractResolver) {
 				}
 
 				log.Errorf("ChannelArbitrator(%v): unable to "+
-					"progress resolver: %v",
-					c.cfg.ChanPoint, err)
+					"progress %T: %v",
+					c.cfg.ChanPoint, currentContract, err)
 				return
 			}
 
diff --git a/contractcourt/channel_arbitrator_test.go b/contractcourt/channel_arbitrator_test.go
index 65bfde650..7b413669f 100644
--- a/contractcourt/channel_arbitrator_test.go
+++ b/contractcourt/channel_arbitrator_test.go
@@ -496,6 +496,8 @@ func TestChannelArbitratorLocalForceClosePendingHtlc(t *testing.T) {
 
 		return nil
 	}
+	chanArb.cfg.PreimageDB = newMockWitnessBeacon()
+	chanArb.cfg.Registry = &mockRegistry{}
 
 	if err := chanArb.Start(); err != nil {
 		t.Fatalf("unable to start ChannelArbitrator: %v", err)
@@ -512,16 +514,33 @@ func TestChannelArbitratorLocalForceClosePendingHtlc(t *testing.T) {
 	chanArb.UpdateContractSignals(signals)
 
 	// Add HTLC to channel arbitrator.
-	htlcIndex := uint64(99)
 	htlc := channeldb.HTLC{
 		Incoming:  false,
 		Amt:       10000,
-		HtlcIndex: htlcIndex,
+		HtlcIndex: 99,
+	}
+
+	outgoingDustHtlc := channeldb.HTLC{
+		Incoming:    false,
+		Amt:         100,
+		HtlcIndex:   100,
+		OutputIndex: -1,
+	}
+
+	incomingDustHtlc := channeldb.HTLC{
+		Incoming:    true,
+		Amt:         105,
+		HtlcIndex:   101,
+		OutputIndex: -1,
+	}
+
+	htlcSet := []channeldb.HTLC{
+		htlc, outgoingDustHtlc, incomingDustHtlc,
 	}
 
 	htlcUpdates <- &ContractUpdate{
 		HtlcKey: LocalHtlcSet,
-		Htlcs:   []channeldb.HTLC{htlc},
+		Htlcs:   htlcSet,
 	}
 
 	errChan := make(chan error, 1)
@@ -607,7 +626,7 @@ func TestChannelArbitratorLocalForceClosePendingHtlc(t *testing.T) {
 		CommitSet: CommitSet{
 			ConfCommitKey: &LocalHtlcSet,
 			HtlcSets: map[HtlcSetKey][]channeldb.HTLC{
-				LocalHtlcSet: {htlc},
+				LocalHtlcSet: htlcSet,
 			},
 		},
 	}
@@ -617,6 +636,22 @@ func TestChannelArbitratorLocalForceClosePendingHtlc(t *testing.T) {
 		StateWaitingFullResolution,
 	)
 
+	// We expect an immediate resolution message for the outgoing dust htlc.
+	// It is not resolvable on-chain.
+	select {
+	case msgs := <-resolutions:
+		if len(msgs) != 1 {
+			t.Fatalf("expected 1 message, instead got %v", len(msgs))
+		}
+
+		if msgs[0].HtlcIndex != outgoingDustHtlc.HtlcIndex {
+			t.Fatalf("wrong htlc index: expected %v, got %v",
+				outgoingDustHtlc.HtlcIndex, msgs[0].HtlcIndex)
+		}
+	case <-time.After(5 * time.Second):
+		t.Fatalf("resolution msgs not sent")
+	}
+
 	// htlcOutgoingContestResolver is now active and waiting for the HTLC to
 	// expire. It should not yet have passed it on for incubation.
 	select {
@@ -649,9 +684,9 @@ func TestChannelArbitratorLocalForceClosePendingHtlc(t *testing.T) {
 			t.Fatalf("expected 1 message, instead got %v", len(msgs))
 		}
 
-		if msgs[0].HtlcIndex != htlcIndex {
+		if msgs[0].HtlcIndex != htlc.HtlcIndex {
 			t.Fatalf("wrong htlc index: expected %v, got %v",
-				htlcIndex, msgs[0].HtlcIndex)
+				htlc.HtlcIndex, msgs[0].HtlcIndex)
 		}
 	case <-time.After(5 * time.Second):
 		t.Fatalf("resolution msgs not sent")