This is an interesting question. I agree that what we write is infused with elements of reality. In my stories, I'm careful to make sure "real" things like buildings and law and personalities are presented as accurately as possible. However, some of my characters are werewolves. They're definitely not real. They're pure imagination.
It is paramount that we, who chose to live in the magical world of fiction, not confuse what is real with what is the stuff of our deliberate dreams. Down that road lies madness.
So yes Virginia, there is fiction.
Oh, funny! I definitely missed that one.
Of course not! And absolutely it's fiction.
For that matter, there is nothing wrong with drawing on our experiences, emotions, and observations when creating characters. But I know of no one who becomes an author in order to lay/slay his psychological demons. Occasionally, someone posts about "killing off" a hateful boss etc. by making him a victim in a book, but I doubt that serious writers play those games. And even if there were such books, they would nevertheless be fiction because they would differ in the details from actual life.
It could also be actionable if the wrong someone else reads them.
Never let the truth get in the way of a good story, but never let it dictate to you, either. No matter how much you draw from real life, you need plausible deniability.
Interesting question. Many if not most of my novels were inspired either by actual crimes or, in the case of my latest which involves a stalker, something that happened to someone I know. However, these are only inspirations. I create new characters and events .. making them even creepier than the original when possible ... and by the time I finish, it's something completely different. Of course, we choose to write what interests us and what interests us reflects on the lives we've led, the people we've met and all of our experiences.
Someone once asked me if a character was based on me. Of course not, but part of me is in every character that I write. It's unavoidable. But it is most definitely fiction nevertheless.