What exactly do I delete?

The KillingFloor2 folder inside Documents\My Games.

Will I lose my settings?

Yes. The folder holds your config files, so graphics and key bindings return to defaults. Back up the folder first if you want to restore custom settings later.

Do I lose perk progress?

Perk progress is stored by the game's online services, but to be safe copy the folder elsewhere before deleting it.

Fixes & Performance

KF2 Not Launching or Not Connecting to Servers: Delete Config Folder

If Killing Floor 2 refuses to start or cannot connect to servers, the fix in this short guide is to reset the game's user data folder. A corrupted or incompatible config left over from an older version is a common cause of such problems.

The fix

Close the game and Steam's KF2 process.
Open Documents\My Games (My Documents on older Windows versions).
Delete the KillingFloor2 folder.
Relaunch Killing Floor 2. The game recreates the folder with fresh default config files.

Notes

Your settings (graphics, controls, key bindings) will reset to defaults. Move the folder to your desktop instead of deleting it so you can copy settings back selectively.
If you had tweaked .ini files, apply those tweaks again after the first successful launch.
For other launch problems see KF2 startup crashes troubleshooting and general crash fixes: config reset and launch log.

FAQ

What exactly do I delete?: The KillingFloor2 folder inside Documents\My Games.
Will I lose my settings?: Yes. The folder holds your config files, so graphics and key bindings return to defaults. Back up the folder first if you want to restore custom settings later.
Do I lose perk progress?: Perk progress is stored by the game's online services, but to be safe copy the folder elsewhere before deleting it.