New York CNN Business  — 

Sears may have life after bankruptcy.

The company has accepted a bid from chairman and former CEO Eddie Lampert that could keep as many as 425 stores operating, according to a source familiar with the process.

Lampert was CEO of Sears Holdings until its October 15 bankruptcy filing, and his $5 billion bid — made through his hedge fund — was the only proposal to keep stores open. Lampert’s bid also included jobs for 50,000 Sears employees.

The final decision doesn’t rest with Sears or its attorneys, but with Judge Robert Drain, who is likely to rule on the auction results once different parties have an opportunity to file objections with the court.

Sears must notify the bankruptcy court of the winning bidder in a filing later Wednesday. Sears and their attorneys did not immediately respond to a request for comment.

Bids were submitted Monday. The source said Lampert improved the terms of his bid during two days of negotiation that ended Wednesday before being tapped as the winning bidder, according to the source, although the source could not say what changes were made.

It’s no surprise that Lampert’s bid won. Sears has said that staying in the business is the best outcome. Competing bids aimed to close stores and liquidate inventory. A committee representing many of its creditors has argued in favor of shutting down the company.

Lampert insists that the bankruptcy process can help Sears shed liabilities and get smaller. A new Sears can be profitable and competitive, he has said.

But Sears’ creditors, including landlords and vendors, have called such a plan “nothing more than wishful thinking” in court filings.

As part of his bid, Lampert offered to forgive $1.3 billion he loaned to Sears. But attorneys for the other creditors argue that the judge should not accept debt forgiveness as part of Lampert’s bid, because Lampert loaned Sears the money when he was chairman and CEO. The creditors’ attorneys question whether the terms of those loans unduly benefited Lampert and his hedge fund rather than Sears.

Lampert and his hedge fund argue the loans were proper and made to keep Sears alive. But if the judge accepts the creditors’ arguments, it could kill Lampert’s chance of buying the company’s assets.

Even if Lampert is able to go ahead with his plan to save Sears, it will be a much smaller retailer, with no stores in a wide swath of Middle America. Most of the stores will be on the West Coast, Northeast and Middle Atlantic, Florida and Texas.

The chain had nearly 700 stores and 68,000 workers at the time of the bankruptcy filing, although many stores have closed and many employees have already left the company.

Emerging from bankruptcy doesn’t necessarily guarantee success. A number of retailers have made it through bankruptcy, only to go out of businesses after filing for bankruptcy again in relatively short order. RadioShack recently suffered this exact fate.