diff --git a/contractcourt/contract_resolvers_test.go b/contractcourt/contract_resolvers_test.go
deleted file mode 100644
index 236a3336..00000000
--- a/contractcourt/contract_resolvers_test.go
+++ /dev/null
@@ -1 +0,0 @@
-package contractcourt
diff --git a/contractcourt/htlc_timeout_resolver_test.go b/contractcourt/htlc_timeout_resolver_test.go
new file mode 100644
index 00000000..c83d66c9
--- /dev/null
+++ b/contractcourt/htlc_timeout_resolver_test.go
@@ -0,0 +1,364 @@
+package contractcourt
+
+import (
+	"bytes"
+	"fmt"
+	"sync"
+	"testing"
+	"time"
+
+	"github.com/btcsuite/btcd/wire"
+	"github.com/lightningnetwork/lnd/chainntnfs"
+	"github.com/lightningnetwork/lnd/input"
+	"github.com/lightningnetwork/lnd/lntypes"
+	"github.com/lightningnetwork/lnd/lnwallet"
+)
+
+type mockSigner struct {
+}
+
+func (m *mockSigner) SignOutputRaw(tx *wire.MsgTx,
+	signDesc *input.SignDescriptor) ([]byte, error) {
+	return nil, nil
+}
+
+func (m *mockSigner) ComputeInputScript(tx *wire.MsgTx,
+	signDesc *input.SignDescriptor) (*input.Script, error) {
+	return nil, nil
+}
+
+type mockWitnessBeacon struct {
+	preImageUpdates chan lntypes.Preimage
+
+	newPreimages chan []lntypes.Preimage
+}
+
+func (m *mockWitnessBeacon) SubscribeUpdates() *WitnessSubscription {
+	return &WitnessSubscription{
+		WitnessUpdates:     m.preImageUpdates,
+		CancelSubscription: func() {},
+	}
+}
+
+func (m *mockWitnessBeacon) LookupPreimage(payhash lntypes.Hash) (lntypes.Preimage, bool) {
+	return lntypes.Preimage{}, false
+}
+
+func (m *mockWitnessBeacon) AddPreimages(preimages ...lntypes.Preimage) error {
+	m.newPreimages <- preimages
+	return nil
+}
+
+// TestHtlcTimeoutResolver tests that the timeout resolver properly handles all
+// variations of possible local+remote spends.
+func TestHtlcTimeoutResolver(t *testing.T) {
+	t.Parallel()
+
+	fakePreimageBytes := bytes.Repeat([]byte{1}, lntypes.HashSize)
+
+	var (
+		htlcOutpoint wire.OutPoint
+		fakePreimage lntypes.Preimage
+	)
+	fakeSignDesc := &input.SignDescriptor{
+		Output: &wire.TxOut{},
+	}
+
+	copy(fakePreimage[:], fakePreimageBytes)
+
+	signer := &mockSigner{}
+	sweepTx := &wire.MsgTx{
+		TxIn: []*wire.TxIn{
+			{
+				PreviousOutPoint: htlcOutpoint,
+				Witness:          [][]byte{{0x01}},
+			},
+		},
+	}
+	fakeTimeout := int32(5)
+
+	templateTx := &wire.MsgTx{
+		TxIn: []*wire.TxIn{
+			{
+				PreviousOutPoint: htlcOutpoint,
+			},
+		},
+	}
+
+	testCases := []struct {
+		// name is a human readable description of the test case.
+		name string
+
+		// remoteCommit denotes if the commitment broadcast was the
+		// remote commitment or not.
+		remoteCommit bool
+
+		// timeout denotes if the HTLC should be let timeout, or if the
+		// "remote" party should sweep it on-chain. This also affects
+		// what type of resolution message we expect.
+		timeout bool
+
+		// txToBroadcast is a function closure that should generate the
+		// transaction that should spend the HTLC output. Test authors
+		// can use this to customize the witness used when spending to
+		// trigger various redemption cases.
+		txToBroadcast func() (*wire.MsgTx, error)
+	}{
+		// Remote commitment is broadcast, we time out the HTLC on
+		// chain, and should expect a fail HTLC resolution.
+		{
+			name:         "timeout remote tx",
+			remoteCommit: true,
+			timeout:      true,
+			txToBroadcast: func() (*wire.MsgTx, error) {
+				witness, err := input.ReceiverHtlcSpendTimeout(
+					signer, fakeSignDesc, sweepTx,
+					fakeTimeout,
+				)
+				if err != nil {
+					return nil, err
+				}
+
+				templateTx.TxIn[0].Witness = witness
+				return templateTx, nil
+			},
+		},
+
+		// Our local commitment is broadcast, we timeout the HTLC and
+		// still expect an HTLC fail resolution.
+		{
+			name:         "timeout local tx",
+			remoteCommit: false,
+			timeout:      true,
+			txToBroadcast: func() (*wire.MsgTx, error) {
+				witness, err := input.SenderHtlcSpendTimeout(
+					nil, signer, fakeSignDesc, sweepTx,
+				)
+				if err != nil {
+					return nil, err
+				}
+
+				templateTx.TxIn[0].Witness = witness
+				return templateTx, nil
+			},
+		},
+
+		// The remote commitment is broadcast, they sweep with the
+		// pre-image, we should get a settle HTLC resolution.
+		{
+			name:         "success remote tx",
+			remoteCommit: true,
+			timeout:      false,
+			txToBroadcast: func() (*wire.MsgTx, error) {
+				witness, err := input.ReceiverHtlcSpendRedeem(
+					nil, fakePreimageBytes, signer,
+					fakeSignDesc, sweepTx,
+				)
+				if err != nil {
+					return nil, err
+				}
+
+				templateTx.TxIn[0].Witness = witness
+				return templateTx, nil
+			},
+		},
+
+		// The local commitment is broadcast, they sweep it with a
+		// timeout from the output, and we should still get the HTLC
+		// settle resolution back.
+		{
+			name:         "success local tx",
+			remoteCommit: false,
+			timeout:      false,
+			txToBroadcast: func() (*wire.MsgTx, error) {
+				witness, err := input.SenderHtlcSpendRedeem(
+					signer, fakeSignDesc, sweepTx,
+					fakePreimageBytes,
+				)
+				if err != nil {
+					return nil, err
+				}
+
+				templateTx.TxIn[0].Witness = witness
+				return templateTx, nil
+			},
+		},
+	}
+
+	notifier := &mockNotifier{
+		epochChan: make(chan *chainntnfs.BlockEpoch),
+		spendChan: make(chan *chainntnfs.SpendDetail),
+		confChan:  make(chan *chainntnfs.TxConfirmation),
+	}
+	witnessBeacon := &mockWitnessBeacon{
+		preImageUpdates: make(chan lntypes.Preimage, 1),
+		newPreimages:    make(chan []lntypes.Preimage),
+	}
+
+	for _, testCase := range testCases {
+		t.Logf("Running test case: %v", testCase.name)
+
+		checkPointChan := make(chan struct{}, 1)
+		incubateChan := make(chan struct{}, 1)
+		resolutionChan := make(chan ResolutionMsg, 1)
+
+		chainCfg := ChannelArbitratorConfig{
+			ChainArbitratorConfig: ChainArbitratorConfig{
+				Notifier:   notifier,
+				PreimageDB: witnessBeacon,
+				IncubateOutputs: func(wire.OutPoint,
+					*lnwallet.CommitOutputResolution,
+					*lnwallet.OutgoingHtlcResolution,
+					*lnwallet.IncomingHtlcResolution,
+					uint32) error {
+
+					incubateChan <- struct{}{}
+					return nil
+				},
+				DeliverResolutionMsg: func(msgs ...ResolutionMsg) error {
+					if len(msgs) != 1 {
+						return fmt.Errorf("expected 1 "+
+							"resolution msg, instead got %v",
+							len(msgs))
+					}
+
+					resolutionChan <- msgs[0]
+					return nil
+				},
+			},
+		}
+
+		resolver := &htlcTimeoutResolver{
+			ResolverKit: ResolverKit{
+				ChannelArbitratorConfig: chainCfg,
+				Checkpoint: func(_ ContractResolver) error {
+					checkPointChan <- struct{}{}
+					return nil
+				},
+			},
+		}
+		resolver.htlcResolution.SweepSignDesc = *fakeSignDesc
+
+		// If the test case needs the remote commitment to be
+		// broadcast, then we'll set the timeout commit to a fake
+		// transaction to force the code path.
+		if !testCase.remoteCommit {
+			resolver.htlcResolution.SignedTimeoutTx = sweepTx
+		}
+
+		// With all the setup above complete, we can initiate the
+		// resolution process, and the bulk of our test.
+		var wg sync.WaitGroup
+		resolveErr := make(chan error, 1)
+		wg.Add(1)
+		go func() {
+			defer wg.Done()
+
+			_, err := resolver.Resolve()
+			if err != nil {
+				resolveErr <- err
+			}
+		}()
+
+		// At the output isn't yet in the nursery, we expect that we
+		// should receive an incubation request.
+		select {
+		case <-incubateChan:
+		case err := <-resolveErr:
+			t.Fatalf("unable to resolve HTLC: %v", err)
+		case <-time.After(time.Second * 5):
+			t.Fatalf("failed to receive incubation request")
+		}
+
+		// Next, the resolver should request a spend notification for
+		// the direct HTLC output. We'll use the txToBroadcast closure
+		// for the test case to generate the transaction that we'll
+		// send to the resolver.
+		spendingTx, err := testCase.txToBroadcast()
+		if err != nil {
+			t.Fatalf("unable to generate tx: %v", err)
+		}
+		select {
+		case notifier.spendChan <- &chainntnfs.SpendDetail{
+			SpendingTx: spendingTx,
+		}:
+		case <-time.After(time.Second * 5):
+			t.Fatalf("failed to request spend ntfn")
+		}
+
+		if !testCase.timeout {
+			// If the resolver should settle now, then we'll
+			// extract the pre-image to be extracted and the
+			// resolution message sent.
+			select {
+			case newPreimage := <-witnessBeacon.newPreimages:
+				if newPreimage[0] != fakePreimage {
+					t.Fatalf("wrong pre-image: "+
+						"expected %v, got %v",
+						fakePreimage, newPreimage)
+				}
+
+			case <-time.After(time.Second * 5):
+				t.Fatalf("pre-image not added")
+			}
+
+			// Finally, we should get a resolution message with the
+			// pre-image set within the message.
+			select {
+			case resolutionMsg := <-resolutionChan:
+				// Once again, the pre-images should match up.
+				if *resolutionMsg.PreImage != fakePreimage {
+					t.Fatalf("wrong pre-image: "+
+						"expected %v, got %v",
+						fakePreimage, resolutionMsg.PreImage)
+				}
+			case <-time.After(time.Second * 5):
+				t.Fatalf("resolution not sent")
+			}
+		} else {
+
+			// Otherwise, the HTLC should now timeout.  First, we
+			// should get a resolution message with a populated
+			// failure message.
+			select {
+			case resolutionMsg := <-resolutionChan:
+				if resolutionMsg.Failure == nil {
+					t.Fatalf("expected failure resolution msg")
+				}
+			case <-time.After(time.Second * 5):
+				t.Fatalf("resolution not sent")
+			}
+
+			// We should also get another request for the spend
+			// notification of the second-level transaction to
+			// indicate that it's been swept by the nursery, but
+			// only if this is a local commitment transaction.
+			if !testCase.remoteCommit {
+				select {
+				case notifier.spendChan <- &chainntnfs.SpendDetail{
+					SpendingTx: spendingTx,
+				}:
+				case <-time.After(time.Second * 5):
+					t.Fatalf("failed to request spend ntfn")
+				}
+			}
+		}
+
+		// In any case, before the resolver exits, it should checkpoint
+		// its final state.
+		select {
+		case <-checkPointChan:
+		case err := <-resolveErr:
+			t.Fatalf("unable to resolve HTLC: %v", err)
+		case <-time.After(time.Second * 5):
+			t.Fatalf("check point not received")
+		}
+
+		wg.Wait()
+
+		// Finally, the resolver should be marked as resolved.
+		if !resolver.resolved {
+			t.Fatalf("resolver should be marked as resolved")
+		}
+	}
+}