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SQL Server transaction log not truncating in simple recovery model mode

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The transaction log for our SQL Server database is no longer truncating when it gets to the restricted file growth limit set by the autogrowth settings. Previously - as expected - it would reach this limit and then truncate allowing further entries. Now it stays full and the application using it shuts down. We are using 2008 R2 and the recovery model is set to simple. Is this a known behaviour / fault which can be resolved ? Thanks.

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