I must preface what I want to say with a disclaimer that if there is fault or error in what I am attempting to convey, find fault with the messenger in this case, not the message, for I know it is true.
With that said, I wanted to address the issue of the debtor and forgiveness but from the perspective of Mormon doctrine. The best place to start is with our Heavenly Father. We believe that we are all His spirit sons and daughters and that we lived with Him before this world was made. At that time (we call it the “pre-existence,” which is somewhat of a misnomer since we believe that we did in fact exist then, just without physical bodies), our Heavenly Father stood out from us, His children, because He had a physical body, whereas we only had spirit ones. At that time—as at this time—He allowed us all to exercise free will (or what we often term “free agency”) to choose to learn and grow and progress to become like Him or choose not to do any of those things. At a council held in this pre-existence, it was proposed that an earth would be created for us, His spirit children, upon which to inherit and gain bodies. As the key player of this plan, a Savior would have to be sent to earth to bring us back to the presence of God, our Heavenly Father. Jesus Christ, pre-mortally known as Jehova, is the first born of all of Heavenly Father’s spirit children, and also the only perfect being of God’s spirit offspring (He is a God and always has been). He was chosen to perform the atoning sacrifice, a critical role that only He could fulfill.
Well, that’s a lot of prologue, but the doctrine of the pre-existence helps lay the ground for future questions, as I will hereafter describe.
So, why are we here? As was outlined in the pre-mortal council, we are here to continue to progress and become like our Heavenly Father, just as an earthly child grows up to become an adult or a seed becomes a tree. It is unique to Mormon doctrine to believe that a physical body is necessary to “progress” in the eternal scheme of things, but its foundation can be found hinted at in biblical passages and events. For example, why was Jesus’ body so important that He needed it back after He died? Does He still have a body now? Why do certain scriptures speak about a future resurrection made possible by Jesus’ resurrection? I won’t answer these questions right now, but understand that Mormon doctrine teaches that, yes, our bodies are eternally significant and that we will possess them eternally after the universal resurrection to come.
If we need a body, then why is life so dang hard? Why do we have to die? Couldn’t God just have handed some bodies out at the pre-mortal council (we call it “the council in Heaven,” by the way) and called it good? The answer to these questions is that we’re not only here to gain a body but also to comprehend that everything has its opposites: good and evil, virtue and vice, etc. Why? Because this knowledge is also what makes Heavenly Father a God, and we could not become fully ‘like Him’ without it. Necessarily, going through this life is fraught with spiritual peril. Satan is a real being who is working against Heavenly Father. He knows that “no unclean thing can enter the Kingdom of Heaven,” and so it is that He tempts us to sin and never repent and thus disqualify ourselves from returning to our Father in Heaven, to progress and be happy. Sin isn’t a necessary part of this mortal experience, but, with the exception of Jesus Christ, our weak selves give in all the time. Heavenly Father knew this from the beginning. That’s why a perfect Son was chosen to be our Savior and that’s why only He could perform the atonement.
Our loving Heavenly Father loves nothing more than to be merciful to us His children, yet He is a being of perfect justice. And, as the Book of Mormon teaches, were He not so, He would cease to be a God (which may sound unique to our doctrine but makes sense really if He is the epitome of perfection and righteousness that He says He is). So to reclaim us who are “unclean,” He sent His only begotten Son in the flesh, Jesus Christ, to gain a body, live perfectly, and—as the only perfect being—sacrifice Himself for the sins of mankind. Thus Jesus Christ has the power to act as Mediator between the Father and us.
As you wrote once, it is true that we are unable to be “free” in Heaven—in the life to come—without our negative baggage being payed for. Now, in Mormon Doctrine, failure to pay the debt does not result in being cast into some pagan pit of fire, but instead it results in receiving less glory in Heaven than those who were righteous (remember how Heavenly Father is perfectly just? Just as there are varying degrees of righteousness among God’s children, there are varying degrees [or “mansions”] of Heaven for us to inherit). How are our debts “forgiven” then? Jesus Christ, who payed the debt of all sin, steps in and uses His suffering as the payment of our debt, saying to the perfect enforcer of justice, our Father, “I have seen the works of this one, and they have been the works I have commanded that He should receive of my grace.”
That is why we must take upon ourselves His “yoke,” or take up our “cross” and follow Him. His works were the works His Father gave Him to do. And, as the earned gate keeper, mercy is thus His to dispense.
This then is termed “forgiveness” because it is not we who must not pay the debt, which can only be payed in suffering, “which suffering caused… even God, the greatest of all, to tremble because of pain, and to bleed at every pore, and to suffer both body and spirit—and would that [He] might not drink the bitter cup, and shrink.” Instead, our obedience to Him enables justice to allow mercy to save us by virtue of the atoning sacrifice of Jesus Christ, or in other words, Christ appeases the demands of justice. It is Christ who has payed the debt. Without Christ, our road of eternal progression, to become like our Heavenly Father, would end at death.
Hopefully that explains—at the very least—how I know that forgiveness is truly forgiveness. I know because I have partaken of Christ’s mercy countless times.
Now I pose another analogy to add some more grist for your thought mill:
A man was confident that God would save Him from drowning if he merely asked it. So he proceeded to throw himself into a lake and wait for the miracle. A boat came by wanting to help the man. The man refused and said that God would save him. The man drowned and went to the spirit world. He asked God, “Why didn’t you save me like I asked?” God responded, “I sent that man in the boat to get you but you refused!”
Now that was a joke, but it makes a good point of just how much influence, though oftentimes unnoticed, the Man who lets God direct his life can have on others.