diff --git a/toolkit/dataloader_mixins.py b/toolkit/dataloader_mixins.py
index 1334d91..efad1f4 100644
--- a/toolkit/dataloader_mixins.py
+++ b/toolkit/dataloader_mixins.py
@@ -1968,11 +1968,13 @@ class LatentCachingMixin:
                 except Exception as e:
                     print_acc(f"Error processing image: {prep_item.path}")
                     print_acc(f"Error: {str(e)}")
-                    raise e
+                    print_acc(" - Skipping file and removing it from the dataset")
+                    return prep_item, None, None, False
                 return prep_item, prep_latent_path, None, True
 
             # use tqdm to show progress
             i = 0
+            failed_items = []
             pbar = tqdm(total=len(self.file_list), desc=f'Caching latents{" to disk" if to_disk else ""}')
             executor = ThreadPoolExecutor(max_workers=num_workers)
             try:
@@ -1986,6 +1988,11 @@ class LatentCachingMixin:
                     next_item = next(file_iter, None)
                     if next_item is not None:
                         pending.append(executor.submit(_prep, next_item))
+                    if latent_path is None:
+                        # file failed to load; drop it from the dataset and keep going
+                        failed_items.append(file_item)
+                        pbar.update(1)
+                        continue
                     if needs_encode and not did_move:
                         self.sd.set_device_state_preset('cache_latents')
                         did_move = True
@@ -1997,10 +2004,33 @@ class LatentCachingMixin:
                 executor.shutdown(wait=True, cancel_futures=True)
                 pbar.close()
 
+            if failed_items:
+                print_acc(f"Removed {len(failed_items)} files from the dataset that failed to load")
+                self._remove_file_items(failed_items)
+
             # restore device state
             if did_move:
                 self.sd.restore_device_state()
 
+    def _remove_file_items(self: 'AiToolkitDataset', items_to_remove: List['FileItemDTO']):
+        # buckets hold raw indices into file_list, so removal requires remapping them
+        remove_ids = {id(item) for item in items_to_remove}
+        old_to_new = {}
+        new_file_list = []
+        for old_idx, item in enumerate(self.file_list):
+            if id(item) in remove_ids:
+                continue
+            old_to_new[old_idx] = len(new_file_list)
+            new_file_list.append(item)
+        self.file_list = new_file_list
+        if self.dataset_config.buckets and getattr(self, 'buckets', None):
+            for key in list(self.buckets.keys()):
+                bucket = self.buckets[key]
+                bucket.file_list_idx = [old_to_new[idx] for idx in bucket.file_list_idx if idx in old_to_new]
+                if len(bucket.file_list_idx) == 0:
+                    del self.buckets[key]
+            self.build_batch_indices()
+
     def _cache_one_latent(
             self: 'AiToolkitDataset',
             file_item: 'FileItemDTO',