As the answer above, the issue stems from the game being blocked from editing its settings files. If that folder does not even exist, then perhaps something moved it (ex. OneDrive is notorious for this).
save files being in steam folder doesnt’ change that grim dawn documents folder should still exist with settings folder/options.txt
if that folder doesnt’ exist something is already wrong
even if you say you don’t use onedrive i’d do manual browse for onedrive folder and see if it’s like computer/onedrive/documents/grim dawn - if that’s the case it means onedrive hijacked your folder
how did you delete your chars?
if you followed the guide Medea posted then your chars werent’ deleted, you just need to set the cloud tag “ingame” off/leave the cloud checkbox blank
if you did something else than what the guide says then i don’t know what might have happened
If you moved your characters to local saves then make sure that cloud saving is turned off in both the Steam settings and the ingame Options menu. If one is on and the other is off then it can look as if you’ve deleted your charcters.