dirtfarmer
1 John 1:19 is indeed applicable to those in Christ, and only those in Christ - new birth on.
The unrighteousness(sin) that it is applicable to is that which happens as we walk in our daily lives. We should never think that because we are a new creation that the old man(old way of thinking that leads us to sin sometimes) does not effect our new man(the new way of thinking that leads us in righteousness).
When understanding what Jesus did in His sacrifice we need to look no further than the examples given to us in the Old Testament. The New Testament sheds light on this so we can clearly see what Christ did and who He is. The book of Hebrews is one of the best compact collections of the purpose of Christ - His sacrifice and His work before the Father in heaven.
We are being conformed, and transformed, day by day. The new birth started this transformation, but just as a child has to grow into maturity - not being mature when born - so we must also grow. The new birth created a new heart in man. We know this heart replaced our old dead heart. Our old dead heart did not care for the things of God and would not submit to the things of God. The heart of man is where thoughts meet actions and produce fruit(works).
2 Corinthians 3:18
And we all, with unveiled face, beholding the glory of the Lord, are being transformed into the same image from one degree of glory to another. For this comes from the Lord who is the Spirit.
Romans 12:1-2
I appeal to you therefore, brothers, by the mercies of God, to present your bodies as a living sacrifice, holy and acceptable to God, which is your spiritual worship. Do not be conformed to this world, but be transformed by the renewal of your mind, that by testing you may discern what is the will of God, what is good and acceptable and perfect.
In the Old Testament, under the old covenant, the people of God had to come to the temple and give offerings for sin. Also, the high priest at the temple would offer up sacrifices for not only himself, but those of the people. This had to be done continually, because people continually sinned. Whenever there is sin, God demands a sacrifice - the shedding of blood. We see this from the very beginning when an animal had to be killed in order to have clothing made for Adam and Eve. But we see the specifics of it, the details of why and how, when Moses brought out the people and lead them to the mountain before God.
Hebrews 9:19-22
For when every commandment of the law had been declared by Moses to all the people, he took the blood of calves and goats, with water and scarlet wool and hyssop, and sprinkled both the book itself and all the people, saying, “This is the blood of the covenant that God commanded for you.” And in the same way he sprinkled with the blood both the tent and all the vessels used in worship. Indeed, under the law almost everything is purified with blood, and without the shedding of blood there is no forgiveness of sins.
When the new covenant was made Jesus became the perfect sacrifice. Not only that, He became our High Priest. He shed His blood, once for all, for ALL sin. He is in heaven now, before God, continually making intersession for us - mediating between us and God.
Before our new birth we did not have this mediation between us and God. But after the new birth, the Spirit of God communicates between us and Christ, and then Christ with God. However, just because the perfect sacrifice was made, and no more blood is needed to be shed for sin, does not mean sin is not dealt with. The people of the old covenant knew that God would forgive their sins by the sacrifice and shedding of blood before Him, but they did not suppose that they did not have to come to God to accept that forgiveness. They knew the high priest would offer sacrifices for the sins of the people, but they did not suppose that it just "automatically" covered theirs without approaching God with their offerings.
I think that many believers feel that because Christ was the perfect sacrifice, shedding His blood once for all, that it "automatically" covers their sin - regardless of their midset. However, that does not mean that when a believer commits a sin that they are "automatically" outside of Gods covering. That is not the case any more than if the people of the old covenant, who were on their way to the temple, died on the way there, and then could not present their offering. God see's the heart, and those in Christ have Christ to make intersession for them.
That does not mean that sin in a believers life goes unchecked. Part of our transformation into His image is the constant removal of sin that does happen. That sin does not only effect a believers flesh, but also their mind.
The confession that John talks about it 1 John 1:19 is our acknowledgement of the sin that happens in our lives. When we confess that sin, we are agreeing with the Spirit that it is wrong and needs removed from our lives. We know that God only accepts blood for the forgiveness of sins, so when we confess them Christ washes them from us - therefore continuing the transformation process. If we don't confess them, then they do effect our lives, and we go against the work of the Spirit in our lives. We oppose the Spirit when confession is not made.
We cannot think that grace "automatically" makes sin disappear, or that grace "automatically" makes sin not effect a believers heart. We cannot think that grace automatically produces righteousness without our knowing it. We must allow God to work in us, through His Spirit, knowing that when we sin the Mediator of the new covenant makes intercession.
The entire chapter of Romans 6 covers this presenting of ourselves before God. Just because we have a new heart that desires God does not mean that the old way of thinking, our old mind, "automatically" presents ourselves. When we confess our sins, we are presenting ourselves before God to have His Spirit remove that sin in our life. Sin has to be removed in ANY persons life in order for God to accept them. For unbelievers that can never happen. For believers it can when we confess them.