yeah it just gets taken away, that happened to me too, i had this sweet ass shield my sorc was using and next thing you know, an inventory full of potions and accidently picking up some cracked piece of shit made me loose it forever, i though it would just leave your body on the ground but i guess there's a few loop holes in the design and you can still accidently lose shit if its done right (or wrong in this case)
i was in a game with my new HC/LAd necro, and i asked sum lvl 60 zon that was rushing to let me loot his body, he was like "omg i wont die, i have to much def, and in A4, he got pwnt in chaos sanctuary lol, and he allowed loot body..to ME!!! and i looted his body, i got Buriza, 34 Vapermagi, and a pair of Marrowwalks!!! Pwnt!!