Stepper motors should hold position when error.

That is what I am trying to figure out. I searched online but found nothing.

Can you reset the drive by disabling and immediately re-enabling the drive?
That is something that could be done in hal (at least for Z)

(assuming you have the drive enable connected)

This is dependent on the outputs and inputs of the stepper driver you are using. Can you share more?

Personally, I don't think you can achieve what you want.

But getting faults on the drive implies an incorrectly set up stepper. Fix that and the problem goes away.Try reducing the current on the drive.

I have built my CNC just this month so I have only conducted test cuts, and have not gotten a driver error while machining yet, i just thought such a setup would make more sense if it did happen.

How are errors on drivers on CNC mills usually set up.

I am using Motor Driver CL-HSS860 driver with nema 34 stepper motor.

In your case, you should have gotten a servo/stepper with brake for Z axis.
It is a hardware feature, so software can not help, but if the loop is closed in LinuxCNC at least it will know the position.
PCW's idea with enabling fast after fault and if loop is closed in LinuxCNC is very good.
As for your question, drive fault will disable the motor in the drive, so nothing LinuxCNC can do about it (except above), and so will LinuxCNC disable everything when it gets a fault error.

The z axis motor does have a brake but there is s delay between the motor going dead and brake engaging. In that delay time the z axis drops a couple centimeters.