"Scratch disk" isn't a setting in Photoshop - it's actual, physical disk space. Photoshop needs a lot of it to work normally. Image editing in general requires huge amounts of memory, much more than any RAM you may have installed in the machine. So this temporary working data is written to disk. That's the scratch disk.
There is no other way to deal with this than to provide more disk space. Either get more disks, or clean out the one you have.
Start by buying an external disk and move as much as you can off your main drive and over to the external. It may not be enough in the long run, but it should get you working again for now.