Katherine Barrett was the younger sister of Rachel Barrett, the first love of Alistair Crane. After Rachel died, Alistair pursued Katherine romantically until she finally agreed to marry him. Unfortunately, Katherine soon learned that Alistair could never love her and viewed her only as a possession. After years of abuse at Alistair's hands, Katherine was forced to flee from her home with Martin Fitzgerald. The two left Harmony as friends and went to Mexico, assuming the identities of husband and wife Bob and Ellen Wheeler. Katherine was cut off from any contact with her children, but as the years passed and she and Martin fell in love, she was able to watch as Martin's youngest daughter Paloma grew up.

After years of living in hiding, Luis and Sheridan came to Mexico to bring Paloma back to Harmony at the same time that Alistair finally discovered where she and Martin were living. After Paloma was kidnapped and Martin and Katherine nearly died (on more than one occasion), Martin and Katherine came back to Harmony with Paloma. They didn't plan to stay around, but Katherine was soon arrested for the attempted murder of Alistair Crane, and the truth about Martin's identity finally came out into the open. His family in Harmony was devastated, and Katherine soon found herself hated by Pilar and her children. Much to Martin and Katherine's shock, Paloma chose not to side with Pilar and her siblings, but remained firm in her loyalty to both Katherine and Martin, showing her love on the eve of the Christmas tree lighting when she was chosen to light the Christmas tree, a tradition started by Katherine herself when Sheridan was a child. When prompted to ask her mother to light the tree with her, Paloma turned her back on Pilar, and begged Katherine to come up with her.

Katherine's close relationship with Paloma didn't pass the test of time, though, as Paloma soon grew close again to her mother, Pilar. Katherine was thrilled to later learn that her sister Rachel was alive and well, and Rachel encouraged Katherine to go after Martin. Katherine went to Martin the morning that he was to marry Pilar and tried to convince him to be with her. Although Martin turned her down, Pilar had seen the two together and turned her back on Martin. Katherine was devastated when Martin didn't want to come back to her.