An investment fund run by the Church of Jesus Christ of Latter-day Saints is preparing to buy a portfolio of life-insurance policies held by bankrupt Life Settlements Absolute Return I LLC after a Delaware judge resolved a dispute over whether the company’s auction for the portfolio was fairly conducted.

Judge Mary Walrath of the U.S. Bankruptcy Court in Wilmington, Del., approved the portfolio’s sale to Salt Lake City investment firm Ensign Peak Advisors Inc. in a deal valued at $30 million.

Life...