Time Capsule Password

Did you save the TC password in your Keychain? You can retrieve it by opening your Keychain (Applications -> Utilities -> Keychain Access). It will prompt you for your user password to show it to you in cleartext.

Reset the TC to factory. No files are lost when you do this.

The Factory Reset universal

Unplug your TC/AE. Hold in reset. and power the TC/AE back on.. all without releasing reset and keep holding in for about 10sec. The time is not important.. it is the front LED rapid flashing that indicates you are in factory mode.

Release reset.

If it doesn’t flash rapidly you have released reset at some point and try again.

Be Gentle! Feel the switch click on. It has a positive feel.. add no more pressure after that.

TC/AE will reboot after a couple of minutes with default factory settings and will wipe out previous configurations.

No files are deleted on the hard disk.. No reset of the TC deletes files.. to do that you use erase from the airport utility.

Always load files off the old Mac to the new one before you wipe and sell it.. because frankly TM is not that trustworthy.

TM can encrypt the backup.. that feature has been there since Lion.

You are perfectly correct.. the TC is a home device.. its security is a mirage.

Anyone can do soft reset and access the data... Is there a way to protect the data in TC?

Such a reset requires access (local or remote), so other aspects of security come into play.

Please see OS X Mavericks: Keep your Time Machine backup disk secure for TC security.

In general, for file system security, please see OS X: About FileVault 2.

The old flat TCs have a Kensington lock for physical security, which has been removed in the new vertical TCs.