diff --git a/components/esp_driver_bitscrambler/src/bitscrambler_loopback.c b/components/esp_driver_bitscrambler/src/bitscrambler_loopback.c
index 7cf0c7b1ca1..8b9d78fc3f4 100644
--- a/components/esp_driver_bitscrambler/src/bitscrambler_loopback.c
+++ b/components/esp_driver_bitscrambler/src/bitscrambler_loopback.c
@@ -72,11 +72,13 @@ esp_err_t bitscrambler_loopback_create(bitscrambler_handle_t *handle, int attach
     if (!handle) {
         return ESP_ERR_INVALID_ARG;
     }
+    *handle = NULL;
     if (attach_to < 0 || attach_to > SOC_BITSCRAMBLER_ATTACH_MAX) {
         return ESP_ERR_INVALID_ARG;
     }
 
     esp_err_t ret = ESP_OK;
+    bool bs_initialized = false;
     bitscrambler_loopback_t *bs = calloc(1, sizeof(bitscrambler_loopback_t));
     if (!bs) {
         return ESP_ERR_NO_MEM;
@@ -88,14 +90,13 @@ esp_err_t bitscrambler_loopback_create(bitscrambler_handle_t *handle, int attach
         .attach_to = attach_to
     };
     ESP_GOTO_ON_ERROR(bitscrambler_init_loopback(&bs->bs, &cfg), err, TAG, "failed bitscrambler init for loopback");
+    bs_initialized = true;
 
     // register extra cleanup function to free loopback resources
     bitscrambler_register_extra_clean_up(&bs->bs, bitscrambler_loopback_cleanup, bs);
 
     bs->sema_done = xSemaphoreCreateBinary();
-    if (!bs->sema_done) {
-        goto err;
-    }
+    ESP_GOTO_ON_FALSE(bs->sema_done, ESP_ERR_NO_MEM, err, TAG, "failed to create semaphore");
 
     bs->max_transfer_sz_bytes = max_transfer_sz_bytes;
     size_t desc_ct = esp_dma_calculate_node_count(max_transfer_sz_bytes, 4, DMA_DESCRIPTOR_BUFFER_MAX_SIZE);
@@ -137,8 +138,11 @@ esp_err_t bitscrambler_loopback_create(bitscrambler_handle_t *handle, int attach
     return ESP_OK;
 
 err:
-    bitscrambler_loopback_free(bs);
-    free(bs);
+    if (bs_initialized) {
+        bitscrambler_free(&bs->bs);
+    } else {
+        free(bs);
+    }
     return ret;
 }
 
diff --git a/components/esp_driver_bitscrambler/test_apps/bitscrambler/main/test_bitscrambler.c b/components/esp_driver_bitscrambler/test_apps/bitscrambler/main/test_bitscrambler.c
index 87f292f47f2..805b89408e2 100644
--- a/components/esp_driver_bitscrambler/test_apps/bitscrambler/main/test_bitscrambler.c
+++ b/components/esp_driver_bitscrambler/test_apps/bitscrambler/main/test_bitscrambler.c
@@ -4,6 +4,7 @@
  * SPDX-License-Identifier: Apache-2.0
  */
 #include <stdio.h>
+#include <stdint.h>
 #include "sdkconfig.h"
 #include "unity.h"
 #include "unity_test_utils.h"
@@ -59,6 +60,19 @@ TEST_CASE("Timeout on stuck program", "[bs]")
     free(data_out);
 }
 
+TEST_CASE("Loopback create failure clears handle and releases channels", "[bs]")
+{
+    bitscrambler_handle_t failed_bs = (bitscrambler_handle_t)0x1;
+
+    esp_err_t err = bitscrambler_loopback_create(&failed_bs, SOC_BITSCRAMBLER_ATTACH_GPSPI2, SIZE_MAX / 2);
+    TEST_ASSERT_NOT_EQUAL(ESP_OK, err);
+    TEST_ASSERT_NULL(failed_bs);
+
+    bitscrambler_handle_t bs = NULL;
+    TEST_ESP_OK(bitscrambler_loopback_create(&bs, SOC_BITSCRAMBLER_ATTACH_GPSPI2, 4096));
+    bitscrambler_free(bs);
+}
+
 TEST_CASE("BitScrambler with EOF counted on upstream", "[bs]")
 {
     const size_t len = 32;