[RayR]

Agree with Worth- sort of but...
The damping off soil borne pathogens ((Pythium, Rhizoctonia or Phytophthorathat)) are eventually fatal.
A spore will somehow get in your soil, germinate and infect a root and spread up to the stem, infection can be very localized when your seedlings are separated into cells or individual pots. You're lucky no other plants were infected. I wouldn't take any chances by putting that plant in the ground, an infected plant is a source for more spores and it can spread. Trash it.