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bblizard

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Try to save Word doc to USB drive, get message "Word cannot complete the save due to a file permission error".

Have reviewed other similar questions on Experts Exchange and Microsoft solutions website, none exactly like mine.  

I have a USB drive that worked fine with on old computer (WIN XP SP2 with Word 2003) but now, when I create a file on the computer and try to save it to the usb drive I get the message "Word cannot complete the save due to a file permission error".  I can save to hard drive, but cannot drag a file from hard drive to usb either.  Tried opening a new word document from the usb drive, but get following message: "Unable to create the file 'New Microsoft Word Document.doc'  The directory or file cannot be created."
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Peregian
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You need to test it again on a different pc just in case its broken. Make sure the switch on the side of the flash drive isnt set to read only.
If still no luck and If its xp pro try this

1.     Click Start, click Run, type cmd, and then press ENTER.
2.     Type secedit /configure /cfg %windir%\repair\secsetup.inf /db secsetup.sdb /verbose, and then press ENTER. You receive a "Task is completed" message, and a warning message that something could not be done. You can safely ignore this message. For more information about this message, view the %windir%\Security\Logs\Scesrv.log file.

that will reset all the security permissions including in the registry.
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x_X_x_X_x

Also some usb drives have a switch that will allow you to write protect them making it read only?
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IPKON_Networks

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