But earlier this month, she was given a new release on life when an Orange County jury awarded her $5.7 million in damages against the parents, Jill and Kent Easter.
"It has been a five-and-a-half-year-ordeal," says Peters. "We are so relieved to be past that civil stage. It is very nerve wracking."
She adds, "People said, Why would you put yourself through that on top of everything else?' You have to do it. You have to stick up for yourself. We were so bullied."
Peters filed a civil suit against the fellow parents after they hatched a plan to frame Peters after Jill Easter (who has since changed her name to Ava Everheart), took offense when Peters said her son was "slow" to line up for after school pick up. Peters meant the word "slow" to indicate that the boy was walking slowly – but Jill Easter perceived the answer to be a crack about his intelligence.
For more on the revenge plot by fellow parents that turned Kelli Peters' life upside down, pick up this week's issue of PEOPLE on newsstands Friday
Kent Easter then called Irvine police, and, disguising his voice in a south Asian accent and giving himself a false name, reported he'd seen Peters driving erratically in the school parking lot.
Peters Lived in Constant Fear of Being ArrestedFor more than a year, Peters lived in constant fear that she would be arrested. The stress became so unbearable she said her hair started falling out. Her husband began suffering panic attacks.
"I was constantly talking to myself going over everything in my head, what will I say to people when I got arrested," she says. "I was in the kitchen constantly talking to myself. Cutting lettuce and going over my story. My daughter would say, 'Mom are you ok?' I wouldn’t even see her or notice her.
"I would cry all the time. I had a special place next to my bed I would hunker down and sit next to the bed and put a blanket over my head and try to get away from the noise and cry and cry. Now it sounds so stupid and dramatic but I just couldn't get away from it."
Photograph by Robert Gallagher; Hair & Makeup: Amanda Abizad / Zenobia
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The ordeal also affected her daughter, who was bullied at school, she says.
On day, says Peters, she saw her daughter walking at the perimeter of the school: "She was crying," Peters remembers. "She asked to play 'tag' with her normal group of friends and they told her she wasn’t allowed to play with them anymore. The next day I noticed they are not sitting with her at lunch. She is just distraught. She is 10 and she has no friends. She would get into my car everyday and bawl her eyes out. 'Nobody likes me.'"
Since the civil judgment, Peters now spends her time caring for her husband Bill, who is battling leukemia. Having the nightmare behind her and her family is the first step in shaking off the paranoia and depression they have fought for five years.
"We will get past this with baby steps," says Peters. "It really took a toll on us. We fought a really hard fight and we were just exhausted. I am so glad it is over."