diff --git a/apps/web/src/app/auth/migrate-encryption/migrate-legacy-encryption.component.ts b/apps/web/src/app/auth/migrate-encryption/migrate-legacy-encryption.component.ts
index 68eaae618f..6c894f4fa8 100644
--- a/apps/web/src/app/auth/migrate-encryption/migrate-legacy-encryption.component.ts
+++ b/apps/web/src/app/auth/migrate-encryption/migrate-legacy-encryption.component.ts
@@ -7,9 +7,9 @@ import { CryptoService } from "@bitwarden/common/platform/abstractions/crypto.se
 import { I18nService } from "@bitwarden/common/platform/abstractions/i18n.service";
 import { LogService } from "@bitwarden/common/platform/abstractions/log.service";
 import { MessagingService } from "@bitwarden/common/platform/abstractions/messaging.service";
-import { PlatformUtilsService } from "@bitwarden/common/platform/abstractions/platform-utils.service";
+import { FolderApiServiceAbstraction } from "@bitwarden/common/vault/abstractions/folder/folder-api.service.abstraction";
 import { SyncService } from "@bitwarden/common/vault/abstractions/sync/sync.service.abstraction";
-import { ToastService } from "@bitwarden/components";
+import { DialogService, ToastService } from "@bitwarden/components";
 
 import { SharedModule } from "../../shared";
 import { UserKeyRotationModule } from "../key-rotation/user-key-rotation.module";
@@ -31,12 +31,13 @@ export class MigrateFromLegacyEncryptionComponent {
     private accountService: AccountService,
     private keyRotationService: UserKeyRotationService,
     private i18nService: I18nService,
-    private platformUtilsService: PlatformUtilsService,
     private cryptoService: CryptoService,
     private messagingService: MessagingService,
     private logService: LogService,
     private syncService: SyncService,
     private toastService: ToastService,
+    private dialogService: DialogService,
+    private folderApiService: FolderApiServiceAbstraction,
   ) {}
 
   submit = async () => {
@@ -69,6 +70,23 @@ export class MigrateFromLegacyEncryptionComponent {
       });
       this.messagingService.send("logout");
     } catch (e) {
+      // If the error is due to missing folders, we can delete all folders and try again
+      if (e.message === "All existing folders must be included in the rotation.") {
+        const deleteFolders = await this.dialogService.openSimpleDialog({
+          type: "warning",
+          title: { key: "encryptionKeyUpdateCannotProceed" },
+          content: { key: "keyUpdateFoldersFailed" },
+          acceptButtonText: { key: "ok" },
+          cancelButtonText: { key: "cancel" },
+        });
+
+        if (deleteFolders) {
+          await this.folderApiService.deleteAll();
+          await this.syncService.fullSync(true, true);
+          await this.submit();
+          return;
+        }
+      }
       this.logService.error(e);
       throw e;
     }
diff --git a/apps/web/src/locales/en/messages.json b/apps/web/src/locales/en/messages.json
index ffb82cd816..c74fd3386a 100644
--- a/apps/web/src/locales/en/messages.json
+++ b/apps/web/src/locales/en/messages.json
@@ -3894,6 +3894,12 @@
       }
     }
   },
+  "encryptionKeyUpdateCannotProceed": {
+    "message": "Encryption key update cannot proceed"
+  },
+  "keyUpdateFoldersFailed": {
+    "message": "When updating your encryption key, your folders could not be decrypted. To continue with the update, your folders must be deleted. No vault items will be deleted if you proceed."
+  },
   "keyUpdated": {
     "message": "Key updated"
   },
diff --git a/libs/common/src/vault/abstractions/folder/folder-api.service.abstraction.ts b/libs/common/src/vault/abstractions/folder/folder-api.service.abstraction.ts
index d29ff71290..1762400b3d 100644
--- a/libs/common/src/vault/abstractions/folder/folder-api.service.abstraction.ts
+++ b/libs/common/src/vault/abstractions/folder/folder-api.service.abstraction.ts
@@ -5,4 +5,5 @@ export class FolderApiServiceAbstraction {
   save: (folder: Folder) => Promise<any>;
   delete: (id: string) => Promise<any>;
   get: (id: string) => Promise<FolderResponse>;
+  deleteAll: () => Promise<void>;
 }
diff --git a/libs/common/src/vault/services/folder/folder-api.service.ts b/libs/common/src/vault/services/folder/folder-api.service.ts
index c618c95872..e46df37c17 100644
--- a/libs/common/src/vault/services/folder/folder-api.service.ts
+++ b/libs/common/src/vault/services/folder/folder-api.service.ts
@@ -32,6 +32,11 @@ export class FolderApiService implements FolderApiServiceAbstraction {
     await this.folderService.delete(id);
   }
 
+  async deleteAll(): Promise<void> {
+    await this.apiService.send("DELETE", "/folders/all", null, true, false);
+    await this.folderService.clear();
+  }
+
   async get(id: string): Promise<FolderResponse> {
     const r = await this.apiService.send("GET", "/folders/" + id, null, true, true);
     return new FolderResponse(r);