According to Old Testament theology, there was no consciousness in the grave (sheol – H7585). David claimed there is no remembrance of God there (Psalm 6:5), neither were the dead able to praise God or hope in his truth (Isaiah 18:38). The fact is: “there is neither work nor planning nor knowledge nor wisdom in the grave” (Ecclesiastes 9:5-6, 10), according to the word of God. Nevertheless, during and after the Babylonian captivity the idea of consciousness and activity in the grave crept into Jewish theology.
In the story of the Rich Man and Lazarus, which Jesus derived from a Jewish myth, he describes Hades (sheol or the grave) as a place where folks could speak with one another and recall certain matters about life. In Luke 16:19-31 the Lord tells of a poor man named Lazarus, who died and was carried by angels to the bosom of Abraham. A rich man also died but he found himself in a flame of fire. The rabbis taught that the grave was divided into two places one part for the righteous and the second part for the wicked. The wicked were tormented in Gehenna (G1067 – see Matthew 5:22).
Notice what Rabbi Joshua ben Levi said:
Lord of the universe, Thou hast judged well, Thou hast condemned well, and well provided Gehenna for the wicked and Paradise for the righteous.
Again, when Rabban Johanan ben Zakkai fell ill he said:
Now that I am being taken before the supreme King of Kings, the Holy One, blessed be He, who lives and endures forever and ever, whose anger, if He is angry with me, is an everlasting anger, who if He imprisons me imprisons me forever, who if He puts me to death puts me to death forever, and whom I cannot persuade with words or bribe with money — nay more, when there are two ways before me, one leading to Paradise and the other to Gehinnom, and I do not know by which I shall be taken, shall I not weep?
In other words, the gulf of Luke 16:26 was fixed between the fire of Gehenna and the paradise of Abraham’s bosom. These were the two places to which the dead went, according to Jewish understanding. Of course, Jesus’ mention of the activity and consciousness in Hades was according to the Jewish myth, not the word of God. The myth actually contradicts the word of God as seen above. Nevertheless, according to the myth, upon which Jesus based his story, the righteous rested with righteous Abraham, and the wicked dead waited afar off or were in some sense separated from the righteous dead. However, the question is, is Abraham and all the righteous dead still in Hades?
According to this story or myth, Abraham told the rich man that the man’s five brothers have Moses and the prophets to point them to the way of salvation (Luke 16:29). Therefore, this parable represents the Jewish hope, not the Christian one, because we have Christ as our Savior, not the Law. According to Hebrews 9:6-10, as long as the Old Covenant was legally binding there was no access to the Most Holy Place. That is, mankind had no access to God’s presence. This story is set in the context of Abraham’s unrealized hopes. Hebrews 11:10 has Abraham looking for a heavenly city whose builder and maker is God (cf. Revelation 21:1-2). He sought a heavenly fatherland (Hebrews 11:14), but he died not receiving the promises (Hebrews 11:13).
When would Abraham receive the promises? Matthew 8:11 shows many coming from the east and the west to sit down in the Kingdom of God with Abraham in what is known as the Messianic banquet. Isaiah says that after the Lord had made the city a heap (Isaiah 25:2), he would prepare a great banquet (Isaiah 25:6) and in that day he would swallow up death in victory (Isaiah 25:8). This is the language of resurrection (cf. 1Corinthians 15:26), when the Lord, Jesus, would descend from heaven, and the dead would be raised (1Corinthians 15:51-56). In other words, at the coming of Jesus from heaven, Abraham would receive the promises and rise out of Hades. This is the time of the resurrection, and it would occur just after the destruction of the city mentioned in Isaiah 25:2, but which city is that?
Jesus told the Jewish authorities of his day that when Abraham sat down at the Messianic banquet in the Kingdom of God, they would find themselves cast out (Matthew 8:12). He told the high priest that he would see Jesus coming in judgment against Jerusalem and the Temple (Matthew 26:64). This occurred cir. 70 AD, and that had to signal that the resurrection had occurred, and the banquet had begun.
 Probably founded upon Egyptian folklore; see my study: Luke and Egyptian Folklore.
 Babylonian Talmud: Eiruvin 19a
 Babylonian Talmud: Berachoth 28b