Fix Fatal Error Problem While Updating Windows 7
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Microsoft has made a hotfix available for users who are facing a problem while updating Windows 7. According to Microsoft Support article KBA983466, Windows 7 and Windows Server 2008 R2 users with a third-party filter driver may get error message when they run Windows Update to check for updates.
Following is the error message seen while using Windows Update:
“A fatal error has occurred.”

This problem occurs because a lock is not released correctly when the computer processes the update sequence number (USN) change journals in the Ntfs.sys driver file.
To fix this problem users need to request hotfix from Microsoft.