Hi Serenity Prayer. Welcome. What a tragic situation.
There's no question that K could and should have been arrested, taken away and possibly charged with attempted murder or assault of some kind. this is a very dangerous situation. \
D is afraid to discipline K and so, the tail now wags the dog. A mentally ill 16 year old who has this kind of record is a danger to everyone involved - that includes you too.
You are right, this bi polar, off meds, child is scary and a ticking timebomb. I am so afraid of who will get hurt before the situatin becomes a crisis and the authorities step in.
The therapist I believe has seen the potential outcome in suggesting that D live elsewhere - but who is going to supervise K? The fact likely is that there's no place in the social structure for K to go to.
Please be fully aware of the potential danger to yourself. There may be nothing you can do except to leave to protect yourself.
Take Care