In the known issues section of the latest Windows 10 Mobile build, Gabe Aul noted the following:

After we released Build 10581 to Windows Insiders in the Fast ring, we discovered a bug in the build that will cause the filesystem to become partially corrupted after doing a factory reset. For those of you who did a factory reset of your phone, you most likely did not notice this issue on Build 10581. Due to this bug however, upgrading to Build 10586 will cause your phone to go into a reboot loop after the upgrade completes – rebooting at the Windows or operator logo. To recover your phone, you can use the hardware key combination to reset your phone which will then put it at the OOBE experience on Build 10586. We highly recommend that you make sure you do a backup your phone *before* upgrading to Build 10586 due to this bug. Additionally, you can also recover your phone by using the Windows Device Recovery Tool to go back to Windows Phone 8.1 and then upgrade to Build 10586.

While Gabe did state that if you had hard reset your Windows Phone device on 10581, you could continue on to 10586 and then hard reset after the process, I’ve discovered in practice that it is not so.

If you have hard-reset, you will most certainly run into a reboot loop, however, if you attempt to hard reset your way out of the reboot loop as per the instructions, you will fail and end up with an even worse loop.

I’ve replicated this on more than one device, I’m certainly sure I don’t want to risk a third. The only way to escape this is to downgrade your device to 8.1 at first. If you’re already in the reboot loop, choose the option for unresponsive phones and work from there.

The key thing to take away is, if you have hard-reset your device while being on 10581 you will most likely need to recover to 8.1 first.

Has anyone updated to 10586 yet? Let us know in the comments below.