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In a challenge, when a model is killed does the unit step up and fill the space right away or later?

is it different when the model killed is a the unit champ as opposed to a character?

I seem to play against High elves all the time, so my challenges usually end during the strikes first phase, getting another model up front to attack at full strength would be very helpful during initiative steps.

It's covered in the BRB, but short answer is yes. If you lose your champ during a challenge, a model immediately steps up to fill his space. If that model's initiative step hasn't passed yet, that model gets to attack as normal.

I'm with streamdragon. That space is filled as soon as the model is killed. It happens a lot with great weapon dwarfs. I *do* run into players who aren't expecting it, and if they seem really uncomfortable with it, I just won't do it.