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The issue never came up when I was an active - but with AEPhi, IIRC, if an in-house legacy comes through rush, the active sister is excused from the discussion and voting process for her bio sister. (She does get a vote, which she hands to the rush chair before leaving the room.) I believe that first cousins can also ask to be excused if they wish.
The idea is that the rest of the chapter can be honest in their discussion without worrying about hurting their sister, and so that the member whose bio sister is coming through doesn't have to listen to her sorority sisters saying potentially negative things about her bio sister... so that a situation like Rosealum described doesn't happen.
As with any legacy, an in-house legacy is automatically invited back to the second round of parties, and if she makes it to pref she goes on the first bid list.
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