This is not an easy subject, but we must understand what scripture gives us and discern. God cannot reward men with the bliss of heaven or the pain of hell before they are judged, and then resurrected to receive one or the other. The Bible nowhere says that rewards are given at death, but at the end of the world. Yet there arose from within the church, a doctrine of a intermediate state before they are judged even if have to suffer for the interim, and holds that they cannot be stopped from heaven as they are immortal notwithstanding any judgment.
On December 19th, 1513 at the Fifth Lateran Council, Pope Leo X issued a Bull (Apostolici regimis) declaring, “We do condemn and reprobate all who assert that the intelligent soul is mortal” (Damnamus et reprobamus omnes assertenes animan intellectivam mortalem esse). This was directed against the growing “heresy” of those who denied the natural immortality of the soul, and the avowed conditional immortality of man. The Bull also decreed that those who adhere to such erroneous assertions should be shunned and punished as heretics. This view further suggests that at the resurrection of the righteous, the body and the soul are reconnected and salvation is now complete in a glorified state.
This caused a elevation of a controversy that went far beyond what the papacy would have wanted, lets see what happened beforehand.
"The event that would propel Martin Luther into historic prominence was his attempt to invite debate on the abuse of the doctrine of indulgences by the papal emissary Johan Tetzel on October 31, 1517. But indulgences cannot be understood without understanding purgatory.
This was a scholastic doctrine invented by the medieval church to explain how God deals with those who are good but are not good enough to merit immediate entry into heaven. Catholicism taught that Christ’s atonement on the cross (collectively) and the sacrament of baptism (individually) freed humans from “original” sin and made it possible to gain access to heaven.
However, because of human’s continuing propensity to commit “mortal sins,” this created a further barrier. Fortunately the church on earth has delegated authority to forgive sins through the sacrament of penance.
The medieval authorities made a distinction between guilt attached to a mortal sin and the penalty or satisfaction that was still due to God even when the guilt was removed. The priest through penance could only remove a small fraction of that satisfaction due so that the remainder (along with the punishment for less serious or venial sins) would have to be paid off after death in purgatory. The time in this prison of purgatory would be measured in tens, hundreds, or thousands of years. So when the church began to issue indulgences (certificates remitting part or all of the satisfaction due for sin), they were expressed in terms of “days” and “years” equivalent to earthy penances so that the perception was that the experience of purgatory was a temporary one. Indulgences were first made available to assist souls in purgatory by a papal bull of 1476....
The immediate cause of Luther’s stand on soul sleep was the issue of purgatory, with its focus on the conscious sufferings of anguished souls. In his famous 95 theses, which he posted at the church door at Wittenberg, Luther addresses purgatory from the viewpoint of a believing Catholic. Martin Luther’s first essay, Die Sieben Puszpsalm appeared in the spring of 1517, and according to Heinz Bluhm was met with instantaneous success. Martin Luther would go on to be one of the most read and beloved German writers. Some even consider him to be the greatest master of the German language. His 95 theses would capture the imagination of 17 the German people and spark the flame of the Reformation."http://digitalcommons.andrews.edu/cgi/viewcontent.cgi?article=1118&context=jats
There are generally two views concerning the state of the dead among Christians. The first view asserts that when a person dies, his soul survives death and continues to exist in some place. For those who are saved, they go straight into paradise. For those who are not so righteous, they go into some halfway house called purgatory (the Catholic view) where they are purified and made ready for paradise. Catholic teaching explicitly affirms the immortality of the soul, but its not supported by scripture.
The second view is that the soul is not a separate entity from the body. The body is a soul. We are all living souls. At death there is no surviving entity called the soul. The soul is dead; it is not immortal. In other words, the soul is simply the person, not a part of the person. It does not and cannot survive death. The person in this state is totally unaware of anything; the Bible calls it a sleep. It is the whole man who lives, the whole man who dies, and the whole man who is resurrected. At the resurrection the person is raised again from the dead and becomes a living soul. God's plan provides for the total eradication of sin and sinners from God's universe. After the judgment at the end, the wicked are cast in the Lake of Fire for the final punishment, and sinners will be no more. Eternal punishment means complete and final separation from God, a eternal exclusion from the privilege of life.
In the Old Testament much was revealed by God concerning the specifics of the afterlife. Believers died in hope of what God in his mercy would yet do for them. Their trust was in God who would ultimately redeem them, and we see their faith took concrete shape, as in Psalm 49...
15 But God will redeem my soul from the power of the grave: for he shall receive me. Selah.
or in Job 19...
25 For I know that my redeemer liveth, and that he shall stand at the latter day upon the earth:
26 And though after my skin worms destroy this body, yet in my flesh shall I see God:
27 Whom I shall see for myself, and mine eyes shall behold, and not another; though my reins be consumed within me.
The future resurrection is spoken of in Daniel 12...
2 And many of them that sleep in the dust of the earth shall awake, some to everlasting life, and some to shame and everlasting contempt.
We also see it in the New Testament...
And thou shalt be blessed; for they cannot recompense thee: for thou shalt be recompensed at the resurrection of the just.
28 Marvel not at this: for the hour is coming, in the which all that are in the graves shall hear his voice,
29 And shall come forth; they that have done good, unto the resurrection of life; and they that have done evil, unto the resurrection of damnation.
In the New Testament, Jesus affirms the certainty of the coming resurrection which, of course, requires the existence of an intermediate state. These passages shed light on it. In Matthew 22:31, Jesus affirms the coming resurrection of the dead, but then you have this.
I am the God of Abraham, and the God of Isaac, and the God of Jacob? God is not the God of the dead, but of the living.
So how is He the God of the living, well we know God can raise anyone from the grave and made alive, as Lazarus was. Christ by His By death paid the ransom for us so we might live again. But who are the ones who will be with God and have eternal life, its not the wicked. So what is the intermediate state of the dead as they await the resurrection at the Second Coming of Christ, let look at what scripture says.