The purpose of this level is to teach you how manipulate files on the fly. The password for bandit12 is in the file data.txt where all lowercase (a-z) and uppercase (A-Z) letters have been rotated by 13 positions.
This can be very difficult to figure out on your own from scratch. If you get totally stuck, it may be best to look at the solution below and simply learn why it works. Once you understand that, you will be able to replicate it on your own.