Debugger hangs in finally block after CTRL+C

Prerequisites

• I have written a descriptive issue title.
• I have searched all open and closed issues to ensure it has not already been reported.
• I have read the troubleshooting guide.
• I am sure this issue is with the extension itself and does not reproduce in a standalone PowerShell instance.
• I have verified that I am using the latest version of Visual Studio Code and the PowerShell extension.
• If this is a security issue, I have read the security issue reporting guidance.

Summary

Debugger and terminal hangs while debugging script in finally {} block after CTRL+C was pressed.

PowerShell Version

Name                           Value
----                           -----
PSVersion                      7.6.0-preview.3
PSEdition                      Core
GitCommitId                    7.6.0-preview.3-29-g14f80030cc1dd1054f447b6a7c4b859285d5bc22
OS                             Microsoft Windows 10.0.26100
Platform                       Win32NT
PSCompatibleVersions           {1.0, 2.0, 3.0, 4.0, 5.0, 5.1, 6.0, 7.0}
PSRemotingProtocolVersion      2.3
SerializationVersion           1.1.0.1
WSManStackVersion              3.0

Name             : Visual Studio Code Host
Version          : 2025.1.0
InstanceId       : 9398e63a-02c1-4dec-a50c-2c5056df2b1f
UI               : System.Management.Automation.Internal.Host.InternalHostUserInterface
CurrentCulture   : en-US
CurrentUICulture : en-US
PrivateData      : Microsoft.PowerShell.ConsoleHost+ConsoleColorProxy
DebuggerEnabled  : True
IsRunspacePushed : False
Runspace         : System.Management.Automation.Runspaces.LocalRunspace

Visual Studio Code Version

1.98.1
2fc07b811f760549dab9be9d2bedd06c51dfcb9a
x64

Extension Version

ironmansoftware.powershell-universal@5.2.0
ms-vscode.powershell@2025.1.0
tylerleonhardt.vscode-inline-values-powershell@0.0.7

Steps to Reproduce

1. Set breakpoint at $counter in the finally {} block
2. Start debugging
3. Press CTRL+C

try {
    $counter = 0
    while ($true) {
        $counter++
        Write-Host "Counter: $counter"
        Start-Sleep -Seconds 1
    }
} finally {
    $counter
}

Visuals

Logs

PowerShell Trace LSP.log
PowerShell.log
StartEditorServices-27172.log

Start by reproducing the hang in Visual Studio Code with the PowerShell script from the issue, then inspect the attached PowerShell Trace LSP.log, PowerShell.log, and StartEditorServices-27172.log. Done means pressing CTRL+C while stopped at $counter in finally no longer leaves the debugger and terminal hung.