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Protecting confidential information is a major concern for organizations and individuals alike, who stand to suffer huge losses if private data falls into the wrong hands. One of the primary threats to confidentiality is malicious software on personal computers, which is estimated to already reside on 100 to 150 million machines. Current security controls, such as firewalls, anti-virus software, and intrusion detection systems, are inadequate at preventing malware infection. This paper introduces Storages Capsules, a new approach for protecting confidential files on a personal computer. Storage Capsules are encrypted file containers that allow a compromised machine to securely view and edit sensitive files without malware being able to steal confidential data. The system achieves this goal by taking a checkpoint of the current system state and disabling device output before allowing access a Storage Capsule. Writes to the Storage Capsule are then sent to a trusted module. When the user is done editing files in the Storage Capsule, the system is restored to its original state and device output resumes normally. Finally, the trusted module declassifies the Storage Capsule by re-encrypting its contents, and exports it for storage in a low-integrity environment. This work presents the design, implementation, and evaluation of Storage Capsules, with a focus on exploring covert channels.