Rules FAQ
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Sacrificing the character happens before reactions to winning or losing the challenge. A sacrificed character cannot be saved. (See Sacrifice.)
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If you lose the challenge, the character is sacrificed even if it is no longer participating in the challenge, or if it has changed control in the meantime. But it is not sacrificed if it has left and re-entered play.
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If the character cannot be sacrificed for some reason (for instance, due to The Crone or Summerhall (FtR)), it simply remains in play.