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My best guess is that the game is utilizing the file even after being closed, but thats not very probably, but it does happen.
My SECOND best guess is that the file itself could be in some way corrupted and the computer doesn't want to remove it for some reason.
As i said, no experience, these just seemed like the most probable to my point of view. Have you tried Google?
Just to clarify, theres nothing in the folder, I deleted it all.
Thanks anyway.
Turns out it's the same fix for the error 'Cant create folder'
This worked for me. Thanks from the future!
edit: if only 2 days in the future...
I just ran into this issue today. I took the name of the folder that had my steam library in it and changed the name of it. Then I created a new blank folder in that same directory with the same name as the secondary folder used to be. From there you should be able to delete out the second library and change back the original folder name if you wish because once the secondary folder is deleted from the list in steam it will no longer search for it.
Hope this helps as it just worked for me!
Change the drive letter of the hard drive which Steam won't recognise (e.g. from E to F). Restart Steam and the download folder should have disappeared.
I then changed the hard drive letter back to its original, restarted Steam, added the download folder and the issue was rectified.
That fixed mine! Thanks, it was really annoying.
This worked for me.
In my case I had reformatted my secondary drive and Steam wouldn't download new games, even though I had recreated the folder. This option puts the necessary files back in the right folder, after which everything starts to work again.
So this works in two cases:
1) You want to delete the folder from Steam but can't.
2) You want to keep using the same location but recreated the folder manually.