Breach of a written contract is 4 years in CA, and it will be tolled as of the filing of the suit (June 2008). It may be close, but odds are you are within the statute. The case should be in small claims court, so you can defend it yourself. Best bet is probably to work out a payment plan with the lender before a judgment gets entered.
You need to make sure what court the summons and complaint were filed in. If it is not small claims court, i.e. it is in Superior Court, Limited Jurisdiction, then you need to file an answer within 30 days from the date you were served. If you don't file an answer, your default will be entered and judgment will be entered against you, even if the statute of limitations has run. The statute of limitations is a defense that must be asserted.
If you need to file an answer, you should include a special affirmative defense asserting the statute of limitations. If the complaint was filed on a date after your last payment was made (see C.C.P. §337(2) and §344), then you have a shot at that defense, assuming there are no other facts that affect the running of the statute of limitations. You can use a Judicial Council form Answer-Contract (PLD-C-010) that you can download online at http://www.courtinfo.ca.gov/forms/fillable/pldc010.pdf or you can get a hard copy at the clerk's office.
If it is small claims court, and you go to the hearing, then you should raise the statute of limitations (i.e. C.C.P. §337 and §344) at the hearing. Again, you must raise it in order to avail yourself of its benefits. If you do not go to the hearing, you will default, i.e. forfeit your case, and a judgment will be entered against you.
If you intend to file an answer, you may want to get some assistance from a lawyer. The San Mateo County Bar Association has a Lawyer Referral Service that can provide you with assistance. The following is from the San Mateo County Bar Association website: http://www.smcba.org
The Lawyer Referral Service, for a nominal fee, provides you with the name of an attorney so that you can set up an interview of up to thirty minutes with an attorney who practices in the area of law related to your problem. The interview is an opportunity for you to explain the general nature of your legal problem, for the attorney to explain his fee structure and to determine if the case is one he/she wishes to pursue. In some cases, an attorney may be able to respond to specific questions, but because the 30-minute timeframe is so limited, attorneys cannot review paperwork presented at the interview, nor can they spend their time prior to the interview reviewing documents.
The cost of the referral is $30, payable in advance in cash or by credit card and is non-refundable.
If the Lawyer Referral Service is unable to provide you with the name of an attorney, the Service will attempt to direct you to another resource you may contact for assistance.
Contact the Lawyer Referral Service by calling 650.369.4149; press "3" at the prompt.