I defaulted on a 401k loan by accident and had $6500 left to pay. I am not with that company anymore. I was told I can add cash funds for the same amount to my IRA to avoid tax penalties. Is that c

Defaulting on a loan results in a "deemed distribution" which makes the outstanding loan balance immediately taxable, does not satisfy the loan and is not eligible for rollover.  If you instead received an offset distribution because you separated from service with the company or had reached age 59½, there is no default of the loan, the offset distribution satisfies the loan and you have until the due date, including extensions, of your tax return for the year of the offset distribution to come up with the money and roll it over to an IRA to continue to defer the taxes on this money and avoid any early-distribution penalty on this money.

A deemed distribution is indicated with code L in box 7 of the Form 1099-R that reports the distribution while an offset distribution is indicated with code M.  A code-L distribution not eligible for rollover while a code M distribution is eligible for rollover as described above.  In either case, if the distribution is an early distribution box 7 will also have code 1 in addition to either code L or code M.