A bankruptcy judge decided Tuesday to give Sears Chairman Eddie Lampert another chance to buy the retailer out of bankruptcy and save roughly 50,000 jobs.

Sears Holdings had planned to reject Lampert's bid to save the 126-year-old company, which would have put it on a course to liquidation.

Lampert had put forward a $4.4 billion bid to save Sears through his hedge fund ESL Investments. One of the biggest unresolved issues had that it fell short of covering the fees and vendor payment it owes, making it "administratively insolvent."

ESL protested Sears' decision. ESL, which worked over the weekend to improve its offer, pointed to the advisory fees that Sears has racked up during bankruptcy, a person familiar told CNBC. Such fees are part of Sears' administrative expenses.

Ultimately, the bankruptcy judge gave Lampert more time — but at a cost. ESL will now be required to pay a $120 million deposit by 4:00 p.m. Wednesday. Sears will allow Lampert to participate in a previously scheduled auction Monday, when it will compare ESL's offer to others by liquidators. But it's unclear where he will get the funds to back his offer. A person familiar with the situation told CNBC Lampert has been working to get the financing.

The people requested anonymity because the information is confidential.

A liquidation remains a possibility, and even if it comes to that pieces of the storied retailer could still be salvaged, like its home services business.

Lampert's grand plan was to fortify two struggling retailers, Sears and Kmart, by combining them in 2005. But the combined companies became victim of savvier competition, changing shopping habits and, many have argued, poor management.