I think you're the first person to mention mental illness! Yes, undiagnosed or under-treated ADHD, depression, anxiety, and drug dependence can look a lot like laziness and someone in need of good kick in the pants.

I know of stories where the parents did just that, and the kid ended up on the streets after couch surfing and discovering harder drugs. If they interpret the ultimatum as their parent not caring about them, they can totally self-destruct to make parents feel guilty, because they internalize that message and stop valuing themselves at all, and because they couldn't get their act together and weren't just being belligerent after all.

I've also read about neurotypical but unmotivated young adults who are enjoying an extended childhood at home who genuinely needed an ultimatum to get their act together and are successful today.

Hard to know the answer, but there are real risks to tough love if the teen can't rise to the challenge. Most people here seem to be assuming she can and is just being willfully a loser.