Ideally, archived chats should be stored in the same folder (but not visible) as they were before they were archived. Alternatively (though a worse option in my opinion), archived chats could be simply returned to their previous folder if they are unarchived.

This feature is important because without it, there is no way to prevent the loss of information from archiving chats, which hinders the archiving feature's ability to be used to manage clutter and space.