As a person's soul releases from the physical body, it continues existence in the next spiritual plane. Rather than Heaven and Hell being physical places with exact physical locations (such as up & down), I believe these are states of consciousness.
Whatever state of spiritual consciousness a person had when they were on the earth plane, they take with them. And they learn and grow from that consciousness.
I also believe that the door to reformation is never closed. Spiritual progression is eternal and infinite, so it takes however long it needs to take. [It's not as if they only have six months to graduate or they get kicked out. *smile*] They go through life review and they take a good look at what they did when they were on the earth plane (the good, the bad, the otherwise). For some, life review takes a while. For others, life review is fast.
Souls also learn more about their connection with the Divine and gain spiritual understanding. Some folks learn about healing; some learn to let go of resentments and fears. They 'recover' from physical, emotional, and mental illness by consciously evolving spiritually.
Most souls learn to communicate with their loved ones on the earth plane. They recognize the energy signatures of their family and friends and shift their vibrational frequency to achieve spirit contact in readings and visitations.
Although they are evolving, those in Spirit usually keep a lot of their personality, many of their opinions, and their love for their family and friends. They share that in mediumship readings with me when I focus on connecting with what I call the Essence of a Spirit. Occasionally, clients report visitations from their spirit loved ones, either in dreams or during their waking hours. Visitations and/or readings can be healing experiences to make amends and assist them in their spiritual evolution.
Many spirits experience reunion with their loved ones who have already crossed. This is achieved by resonating at the same vibrational frequency. And this is usually dependent on both parties mutually desiring reconnection.
One of the best descriptions of progression after passing and example of the states of consciousness of the spiritual plane (that I have found so far) is presented in the movie 'What Dreams May Come'. In this film, a family deals with death and meeting with/recognizing each other after crossing. Each person creates their own reality and space. They pursue their own spiritual paths and activities with the help of guides, angels, and loved ones.
In fact, those in spirit are engaged in so many pursuits, that the list seems infinite. I get lost in the endless quantum physics of it all. Suffice it to say, I have met many spirits who are quite happily probing the secrets of the earth plane and investigating those of the spirit world.
By now I'm sure you realize, "Where are they?" is a multi-faceted question with many answers. As you expand your spiritual awareness, you may have confirmation of that written above. Or you may have other experiences. As always, seek the answers with your own soul. Perhaps we need to answer this question first "Where are we?"