How can Jesus pay our penalty by dying in our place? How does it work, legally and practically?
Perhaps it will help to give an analogy to try and show the way Jesus paid our penalty. Think of an extremely wealthy man, such as Bill Gates. Imagine he was to stand outside a court with a cheque book or debit card and offer to pay the fines of any person fined in that court, provided they wanted him to do so and asked him to do it. Thus, as people came out with fines of one amount or another, Bill Gates could write out a cheque to pay each fine, whether it be high or low. His bank account would be more than big enough to pay for the fines of all the people who asked him to do so.
It was a little bit like that when Jesus paid the penalty for our sin. He was infinitely holy and sinless and yet He died a brutal death. That created an infinite capacity for Him to pay for your sin and mine. It is almost as if Jesus, through His infinitely unjust death, acquired an infinite ‘bank account’. He can then use that to pay the ‘fines’ of people like you and me. Mathematically that would be correct. One man with an infinite bank account could pay the fines owed by any number of people.
Another way to understand the idea of Jesus dying in our place is to think of a Judge. One day there appears before him a man whom he knows, someone he went to school with, who is now facing a criminal prosecution. Imagine the dilemma that the Judge faces. He has his own professional duty, or code of conduct, which requires him to fully carry out the due process of the law. He has to make sure that the prosecution is conducted properly and that it arrives at a proper verdict. Then, if guilt is found, it is his duty to impose an appropriate sentence. If he failed to do so, he would be doing wrong and acting improperly, which he would never be willing to do.
Imagine though that the Judge does not want to pass sentence on his old friend but would rather show mercy towards him. You see then the conflict between his sense of justice and the need to do his duty professionally, but on the other hand his heart's desire is to show mercy. He wishes to spare his friend from the full blast of the law, but he is not willing to break the law in doing so. What could the Judge do to get around this dilemma?
He could resolve it by finding his friend guilty and sentencing him to the full penalty. But then, having done so, he could take out his own cheque book and write out a cheque himself for the full amount of the fine that he has just imposed on his friend. By doing that, he has fully honoured his duty to his office and to the law. He has not compromised himself or broken the law in any way. Yet, the judge has found a way to redirect the severity of the criminal law away from his friend and towards himself. He takes its full penalty upon himself. Then his friend can be spared from its impact.
Likewise, Jesus found a way to ensure that the full penalty for the breaking of God's Law came to be paid by Himself. Thus there was no compromise or breaking of the Law. But at the same time, God’s mercy could fully come into operation, because Jesus redirected all of the severity of the Law towards Himself, rather than letting it fall on us.