NCUA has until Friday at 12:00 pm to explain to the U.S. District Court for the District of Columbia why the court should not prevent it from liquidating the Kappa Alpha Psi Federal Credit Union.

The agency announced it would liquidate the credit union on August 3, but the credit union went to court to stay and reverse the liquidation.

According to press reports, U.S. District Court Judge Emmet Sullivan said that he likely lacked the authority to stop the liquidation, but nonetheless ordered the agency to produce an argument by Friday Aug. 13 about why the court should not stop it. The order also gave the credit union until Aug. 16 to produce an argument as to why the court does have the authority stop the liquidation.

The agency has said the credit union's liquidation was warranted because it was minimally capitalized based on its March 31 financial statements. But in its legal briefs the credit union claimed that as of June 30 it had raised its capital ratio to 3.67% and that NCUA's examiner had validated those financial reports.

The credit union is working toward a merger with the $129 million Hope Community Credit Union according to press reports, but the details have not been finalized. In its court documents the credit union contended that publishing the liquidation order "is defamatory, casts KAPFCU in a false light, and has caused an erosion of public confidence."