My sister had to use the scheme when the Icelandic banks went belly up a few years ago and it was amazingly efficient. They contacted her rather than her having to contact them. She got her money back in a matter of days with the interest that she would have missed out on included! So I really have no worries.
One thing to be very careful of though is that it is per institution not per bank!
As for debts:
The full guide can be read here: http://www.moneysavingexpert.com/savings/safe-savingsMartin Lewis wrote:If you have debts, such as a mortgage, loan or credit card with a bank that you also have savings with, these two things will be treated separately. This means that, if the bank went bust, you'd receive compensation for your savings from the FSCS, and still owe the bank the full amount of your debts.
This system changed in January 2011; previously your savings were subtracted from debts automatically. The new arrangement gives you the cash to do whatever you would like with; you aren't forced to pay off debts that you wouldn't have under normal circumstances.
If you have savings in one institution which come to more than the FSCS limit of £85,000, then anything over that are likely to be automatically deducted from your debts when administrators come into the bank - another good reason to adhere to the limits.
