Forgiveness is a difficult thing to understand sometimes. It really depends, the verbal expression of it and the internal process of it, they can be two different things. Through compassion to ourselves, we would like to forgive a person. This doesn't mean we condone their actions, but we understand that they are a human being who makes mistakes. Through ignorance they caused harm to others. Through compassion we try to see the person with ignorance, if they have done something harmful to us, because if we don't forgive, we suffer.
So through Compassion to ourselves we forgive internally, but the verbal expression of forgiveness to another person has to be done very skillfully, because if we forgive a person and they do not actually regret or take responsibility for their actions, it communicates to them that they can continue those actions. We have to be careful about our verbal expression of forgiveness. If the person definitely is regretful about what they have done and seeks to try to overcome this by changing their actions, then they have already acknowledged that their actions were unskillful and are taking this step to prevent it happening in the future. At that time it is ok to express forgiveness outwardly.
However, if the person has not voiced any regret for their actions and actually does not believe that there was anything wrong with what they did, then it is not very compassionate to them to voice to them that we have forgiven them, even though we may have forgiven them internally, because then there is no motivation for them to change. Then they may consider, "Well, they are not going to do anything, why not do it again?" and this encourages abuse. So in the action of forgiveness we want to separate our verbal expression, the expression of forgiveness from the internal forgiveness that we have within ourselves.
When is it time to stop the contact? Again, if they are continuing to cause harm to us and to others, and if they think it is fine for them to do so, then it is best to go away from that person. You can have compassion for people you don't want to be around. This is quite an important thing to understand, because a lot of people think if they have compassion for a person they have to be in a relationship or association with that person, but you can have compassion for people that you don't wish to associate with. It is compassion to yourself to discriminate who you are going to be around, and if a person is taking advantage of you or abusing you, then it is not compassion to yourself and it is not compassion to them to stay around them.
Why is it not compassion to them? Because you are encouraging them to continue bad actions through your giving in to them all the time, and this is not compassion to them. It is much more compassion to them if you went away from them and showed them that their unbeneficial actions bring unbeneficial results, otherwise they don't learn the law of Kamma. But if we do go away from them we have to be motivated by compassion - a firmer face of compassion. This can be very difficult to understand sometimes but compassion has many faces and we have to pick the appropriate face of compassion at the appropriate time.