Through the Word of God the indwelling Holy Spirit shows the Christian that he (1) still possesses an old nature (v.8), and (2) needs the forgiveness of his sins (vv. 9-10). The blood of Christ is the divine provision for both.
To walk in the light is to live in fellowship with the Father and the Son. Sin interrupts fellowship but cannot change the relationship. Confession restores fellowship and immediate confession keeps the fellowship unbroken.
My Bible of choice is the Oxford New International Version Scofield Study Bible, the 1984 printing of the 1967 edition.