diff --git a/fineract-loan/src/main/java/org/apache/fineract/portfolio/loanaccount/domain/DefaultLoanLifecycleStateMachine.java b/fineract-loan/src/main/java/org/apache/fineract/portfolio/loanaccount/domain/DefaultLoanLifecycleStateMachine.java
index 0508768623d..06d2251e043 100644
--- a/fineract-loan/src/main/java/org/apache/fineract/portfolio/loanaccount/domain/DefaultLoanLifecycleStateMachine.java
+++ b/fineract-loan/src/main/java/org/apache/fineract/portfolio/loanaccount/domain/DefaultLoanLifecycleStateMachine.java
@@ -18,10 +18,13 @@
  */
 package org.apache.fineract.portfolio.loanaccount.domain;
 
+import java.math.BigDecimal;
 import java.util.List;
 import lombok.RequiredArgsConstructor;
 import org.apache.fineract.infrastructure.event.business.domain.loan.LoanStatusChangedBusinessEvent;
 import org.apache.fineract.infrastructure.event.business.service.BusinessEventNotifierService;
+import org.slf4j.Logger;
+import org.slf4j.LoggerFactory;
 import org.springframework.stereotype.Component;
 
 // TODO: introduce tests for the state machine
@@ -29,6 +32,8 @@
 @RequiredArgsConstructor
 public class DefaultLoanLifecycleStateMachine implements LoanLifecycleStateMachine {
 
+    private static Logger LOG = LoggerFactory.getLogger(DefaultLoanLifecycleStateMachine.class);
+
     private static final List<LoanStatus> ALLOWED_LOAN_STATUSES = List.of(LoanStatus.values());
     private final BusinessEventNotifierService businessEventNotifierService;
 
@@ -40,6 +45,9 @@ public LoanStatus dryTransition(final LoanEvent loanEvent, final Loan loan) {
 
     @Override
     public void transition(final LoanEvent loanEvent, final Loan loan) {
+        loan.updateLoanSummaryDerivedFields();
+
+        LoanStatus oldStatus = loan.getStatus();
         LoanStatus newStatus = getNextStatus(loanEvent, loan);
         if (newStatus != null) {
             Integer newPlainStatus = newStatus.getValue();
@@ -51,16 +59,22 @@ public void transition(final LoanEvent loanEvent, final Loan loan) {
             }
 
             // set mandatory field states based on new status after the transition
+            LOG.debug("Transitioning loan {} status from {} to {}", loan.getId(), oldStatus, newStatus);
             switch (newStatus) {
+                case SUBMITTED_AND_PENDING_APPROVAL -> {
+                    loan.setApprovedOnDate(null);
+                    loan.setApprovedBy(null);
+                }
+                case APPROVED -> {
+                    loan.setDisbursedBy(null);
+                    loan.setActualDisbursementDate(null);
+                }
                 case ACTIVE -> {
-                    if (loan.getClosedOnDate() != null) {
-                        loan.setClosedOnDate(null);
-                    }
-                    if (loan.getOverpaidOnDate() != null) {
-                        loan.setOverpaidOnDate(null);
-                    }
+                    loan.setClosedBy(null);
+                    loan.setClosedOnDate(null);
+                    loan.setOverpaidOnDate(null);
                 }
-                default -> {
+                default -> { // no fields need to get cleared
                 }
             }
         }
@@ -145,7 +159,12 @@ private LoanStatus getNextStatus(LoanEvent loanEvent, Loan loan) {
             case LOAN_ADJUST_TRANSACTION:
                 if (anyOfAllowedWhenComingFrom(from, LoanStatus.CLOSED_OBLIGATIONS_MET, LoanStatus.CLOSED_WRITTEN_OFF,
                         LoanStatus.CLOSED_RESCHEDULE_OUTSTANDING_AMOUNT)) {
-                    newState = activeTransition();
+                    boolean isOverpaid = loan.getTotalOverpaid() != null && loan.getTotalOverpaid().compareTo(BigDecimal.ZERO) > 0;
+                    if (isOverpaid) {
+                        newState = overpaidTransition();
+                    } else {
+                        newState = activeTransition();
+                    }
                 }
             break;
             case LOAN_INITIATE_TRANSFER:
diff --git a/fineract-loan/src/main/java/org/apache/fineract/portfolio/loanaccount/domain/Loan.java b/fineract-loan/src/main/java/org/apache/fineract/portfolio/loanaccount/domain/Loan.java
index 17c7281e651..80fb57c0452 100644
--- a/fineract-loan/src/main/java/org/apache/fineract/portfolio/loanaccount/domain/Loan.java
+++ b/fineract-loan/src/main/java/org/apache/fineract/portfolio/loanaccount/domain/Loan.java
@@ -1300,7 +1300,9 @@ public void updateLoanScheduleDependentDerivedFields() {
 
     public void updateLoanSummaryDerivedFields() {
         if (isNotDisbursed()) {
-            this.summary.zeroFields();
+            if (this.summary != null) {
+                this.summary.zeroFields();
+            }
             this.totalOverpaid = null;
         } else {
             final Money overpaidBy = calculateTotalOverpayment();
@@ -3017,7 +3019,7 @@ public boolean isNotSubmittedAndPendingApproval() {
     }
 
     public LoanStatus getStatus() {
-        return LoanStatus.fromInt(this.loanStatus);
+        return this.loanStatus == null ? null : LoanStatus.fromInt(this.loanStatus);
     }
 
     public Integer getPlainStatus() {
diff --git a/integration-tests/src/test/java/org/apache/fineract/integrationtests/ClientLoanCreditBalanceRefundandRepaymentTypeIntegrationTest.java b/integration-tests/src/test/java/org/apache/fineract/integrationtests/ClientLoanCreditBalanceRefundandRepaymentTypeIntegrationTest.java
index 38c8843d425..40c8ae4d6db 100644
--- a/integration-tests/src/test/java/org/apache/fineract/integrationtests/ClientLoanCreditBalanceRefundandRepaymentTypeIntegrationTest.java
+++ b/integration-tests/src/test/java/org/apache/fineract/integrationtests/ClientLoanCreditBalanceRefundandRepaymentTypeIntegrationTest.java
@@ -245,7 +245,8 @@ public void cantRefundMoreThanOverpaidTest(LoanProductTestBuilder loanProductTes
 
     @ParameterizedTest
     @MethodSource("loanProductFactory")
-    public void fullRefundChangesStatusToClosedObligationMetTest(LoanProductTestBuilder loanProductTestBuilder) {
+    public void fullRefundChangesStatusToClosedObligationMetAndSetBackToOverpayAfterReverseTest(
+            LoanProductTestBuilder loanProductTestBuilder) {
         disburseLoanOfAccountingRule(ACCRUAL_PERIODIC, loanProductTestBuilder);
         HashMap loanStatusHashMap = makeRepayment("06 January 2022", 20000.00f); // overpayment
         LoanStatusChecker.verifyLoanAccountIsOverPaid(loanStatusHashMap);
@@ -255,7 +256,8 @@ public void fullRefundChangesStatusToClosedObligationMetTest(LoanProductTestBuil
 
         final String creditBalanceRefundDate = "09 January 2022";
         final String externalId = null;
-        loanTransactionHelper.creditBalanceRefund(creditBalanceRefundDate, totalOverpaid, externalId, disbursedLoanID, null);
+        Integer resourceId = (Integer) loanTransactionHelper.creditBalanceRefund(creditBalanceRefundDate, totalOverpaid, externalId,
+                disbursedLoanID, "resourceId");
         loanStatusHashMap = (HashMap) this.loanTransactionHelper.getLoanDetail(this.requestSpec, this.responseSpec, disbursedLoanID,
                 "status");
         LoanStatusChecker.verifyLoanAccountIsClosed(loanStatusHashMap);
@@ -267,6 +269,18 @@ public void fullRefundChangesStatusToClosedObligationMetTest(LoanProductTestBuil
             totalOverpaidAtEnd = floatZero;
         }
         assertEquals(totalOverpaidAtEnd, floatZero);
+
+        loanTransactionHelper.reverseLoanTransaction(disbursedLoanID, resourceId.longValue(), creditBalanceRefundDate, responseSpec);
+
+        loanStatusHashMap = (HashMap) this.loanTransactionHelper.getLoanDetail(this.requestSpec, this.responseSpec, disbursedLoanID,
+                "status");
+
+        LoanStatusChecker.verifyLoanAccountIsOverPaid(loanStatusHashMap);
+
+        Float totalOverpaidAfterReverse = (Float) this.loanTransactionHelper.getLoanDetail(this.requestSpec, this.responseSpec,
+                disbursedLoanID, "totalOverpaid");
+
+        assertEquals(totalOverpaidAfterReverse, totalOverpaid);
     }
 
     @ParameterizedTest