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True Image Home 2011 - Disk is Full

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Hi, I am using True Image Home 2011, the backups seem to be running ok but there is a message in the log saying that it has been cancelled because there isn't enough disk space. It is a 1TB hard drive that has 505GB used for backup and 425GB free, when I look at the backup settings the backup estimate size is only 336GB. I noticed an error message for another version of Acronis and was wondering if the same thing was happening - http://kb.acronis.com/content/14908 . It is currently set to version chain at 10pm every night. I would like to know if the error message is correct and if I need to fix anything. Any help is appreciated.

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Does this backup task delete the oldest backup? If so, there's not sufficient disk space, because ATI must create the new backup before deleting the old one. This is sensible, as it prevents the situation where prior deletion followed by a failed new backup could result in no backup.

No I don't think so because I am able to explore the old backup and see the files, and the hard drive says there is 505GB used and it is only used for backups. It is set to version chain and to delete backups older than 6 months so would it delete the older backup? It has only been running for a week. I am thinking of trying a larger hard drive today just to see what it does. Otherwise I am just going back to Windows Backup.