What I've done in the past is to have a default config file which is checked in to source control. Then, each developer has their own override config file which is excluded from source control. The app first loads the default, and then if the override file is present, loads that and uses any settings from the override in preference to the default file.
In general, the smaller the override file the better, but it can always contain more settings for a developer with a very non-standard environment.
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