Most people consider forgetfulness to be a big defect. In Rebbe Nachman's eyes forgetfulness has great benefits. If forgetfulness did not exist, it would be impossible to do any action in Avodas Hashem. If a person would remember everything that he passed through, he would be completely unable to pick himself up to do Avodas Hashem, no matter what. Additionally all the things that a person is currently dealing with would cause him great confusion. Now that forgetfulness exists, a person can forget all of this.
Rebbe Nachman himself used to act in the following way; everything that already occurred, he would consider over and completely finished. He would not allow it to enter his mind again at all, and did not confuse himself at all with previous events that already occurred and are now over.
This is a very great technique to use for serving Hashem. Very often a person experiences much confusion and great confoundment in his mind from events that took place in the past. This is especially true during times of prayer. While praying all his complexions regarding the past come to him, confounding and mix up his mind. Sometimes a person has confusions regarding his business dealings, daily life etc.., that he did not act properly regarding this and that, and he should have acted differently, or many similar perplexions.
There are also those that fall into confusion at the times they study and pray regarding the spiritual flaws they committed earlier, they are confounded with thoughts of how they acted improperly in front of Hashem, and many other variations of these thoughts, as is well know to each person. Therefore forgetfulness is a great method to prevent this. Immediately after something happened and is over, a person should remove and banish it from his mind completely, totally distracting his concentration from it and should not continue to think about it any more. Understand this technique well, since it is a very powerful method.
(Sichos Haran 26)