When a creditor gives up on ever getting paid, they sometimes list the item as a "charge off" or a "profit and loss write-off." This doesn't mean that you no longer owe the debt. This just means that they've written the debt off against their corporate taxes. In fact, it becomes much more likely that the debt will be sold off or consigned to a collection agency for further action.
It's uncertain whether or not the credit score takes the "charge off" part of the listing into account, but it's sure that such accounts are rated a "9" (which is very bad) and they are devastating to the credit score.