When a debt is delinquent or in default, it is still owed by the consumer. It is not excused unless they separately cancel the debt.
Charing a bad debt to profit and loss does not cancel the continued debt obligatin by the consumer.
The "tax write-off" issues associated with the bad debt are accounting an income tax issues that are totally internal to the creditor.
When they do a CO, they move the debt out of their accounting ledger as a receivable asset, which reduces their taxable assets.
If later reimbursed, eithr by the consumer of another party, that money becomes income that they must them declare, which effectively cancels their prior tax write-off.
It is a common misconception that a "write-off" of a debt in a creditor's books is a write-off of debt obligation by the consumer.
The laws permitting, and often requriing, creditors to charge-off bad debts is a public interest issue.
They serve the interest of preventing a business from overstating their actual assets by including debt that is considered as having become "uncollectible", and thus unlikely to be paid, in their statement of net assets. That can mislead stockholders or potential investors as to the "true value" of a business by inclusion of "unreal" assets as part of their worth.
