In my experience when the subject of sin comes up people get hung up on one of two extremes:

On the one hand they live in morbid fear where they simply do not take God's grace seriously. They may accept theologically that they are saved by the grace Jesus offers them, but they are unwilling to truly rest in that grace and trust that it is real and true. So, they wander through life afraid - afraid of things they need not be fearful of. They worry if there is some sin that is outside of God's forgiveness, that if they might forget to confess something that they will be doomed or if they don't somehow prove they are sincere enough then things won't count. This isn't true and God's people don't have to live there. It's a satanic trap that incapacitates people.

On the other hand, people live with no fear of God and they don't take the reality and the consequences of sin seriously. Sin is real and there is no excuse we can make and we cannot rationalize it all away. "For the wages of sin is death." (Romans 6:23) For me to arrogantly act as if sin is of no consequence or that I need not respect and be in awe of God's holiness is a dangerous mistake. I may be able to blow off another person or even rebel against a government authority and get away with it, but no one will escape the authority of God. His standard is perfect and holy and we would do well to respect that. Knowing that we have violated that standard should shake us to the core - and drive us toward confession of sin, repentance and God's forgiving grace.

Both of these extremes are dangerous and both incapacitate the spiritual life. I believe that a grounded, biblical balance will rest securely in the gracious love of God, trusting His grace is always big enough to forgive all sin while at the same time being aware of God's perfect standard and living in holy awe and respect of that standard.

Here are a couple of scriptures that help form my understanding:

Therefore, since we have been justified through faith, we have peace with God through our Lord Jesus Christ, through whom we have gained access by faith into this grace in which we now stand. And we rejoice in the hope of the glory of God. (Romans 5:1-2)

What shall we say, then? Shall we go on sinning so that grace may increase? By no means! We died to sin; how can we live in it any longer? (Romans 6:1-2)

Therefore, my dear friends, as you have always obeyed—not only in my presence, but now much more in my absence—continue to work out your salvation with fear and trembling, for it is God who works in you to will and to act according to his good purpose. (Philippians 2:12-13)

I could go on, but these make the case strongly I think. The key is to rest securely in God's grace, depending on that grace every day and then surrendering your will to God, to follow Jesus by the guidance and power of the Holy Spirit.

Why do you think people get caught up those two extremes? Have you been there? Are you there now? What other scriptures would you add to bring more clarity to the issue?