A method and apparatus for processing timeout events in a packet network are disclosed. For example, the method detects a timeout event by a first network element, wherein the timeout event is generated due to a lack of response from a second network element. The method then determines whether a threshold for reporting of timeouts is exceeded for the second network element. The method then generates a report by the first network element to a fault management system if the threshold is exceeded, where the report indicates that the second network element has exceeded the threshold for reporting of timeouts.