*the "bad" (kako) is usually translated as wicked, evil. That you shall receive good for good bad for bad. That doesn't sound like obliteration of sin, or of having your sins "paid" back by sitting in the Purgatory.
Other instances in the NT also point to the same message: that we will receive according to what we have done. That invalidates all three major Christian denominations in their quest for "understanding" what happens after death. Protestants say all we have to do is believe and all our sins will be forgiven. Catholics think they can somehow "earn" their ticket into heaven by payback method, and we believe that if we are Christ-like we will not burn.
As for the prayers for the dead, the only Scrpitural reference is 2 Maccabees, that it is a form of "sin offering" for the departed. Liturgy offers prayers for those who die in sound faith (i.e. in communion with the Church) only. We do not ask for God's mercy for those lost souls who rejected Him in error. It is offered only for those "worthy of sacred prayers" (+Basil ... hmmm, is anyone worthy?).
Orthodox Catechism says that "prayers of the living for the dead are prayers of gratitude to Almighty God, that He has already saved the soul of the departed one, and are not prayers to forgive the sins of the dead."
Nonetheless, we do not know the Mystery of God, and our worship is not sound knowledge but hope that our prayers "could be beneficial to the departed souls" because "though there is no repentance after death, no one knows God's Will concerning His forgiveness of man's sin."
Thus, various customs of hope for the life after death are by no means certainty, and thus far all three major denominations of Christian thought simply approach it consistent with their cultural and traditional manner and not as a matter of sound knowledge.
I always found it suspect that people wanted to push prayers to saints and dead family members, etc, knowing that Ecclesiastes flatly denies interaction between the living and the physically dead. If the scripture says it's impossible, it becomes a matter of semantic gymnastics to create a doctrine saying the opposite. Would like to hear your take on that, as I know what my Jewish Pop says about it (agrees with me and more). A little different subject than you were addressing; but...