I tried to run $ bundle exec rake db:reset
and found the following on console
Couldn\'t drop db/development.sqlite3 : #
Have been trying to resolve the same issue. Stopping Rails Server on Windows didn't help, but restarting the whole environment did the trick, bundle exec rake db:reset went through, but be sure not to start your server before that as it will call the same error. Continue with
$ bundle exec rake db:reset
$ bundle exec rake db:populate
$ bundle exec rake test:prepare
and start Rails Server after that.