$3000 Bedroom addition for our kids

Hi! me and my partner both are employed full time and have a busy house of 5 kids ages 7,8,13,14 and we are requesting help with a house renovation that has really hurt us financially and made it hard for even basic necessities at this point. Back in July we made the decision to combine our homes and start our future together. me and my 3 kids and him and his 2 kids. I was living in an income based apartment and he lives in an older 2 bedroom farmhouse. We started the process to buy a home and we just couldn’t justify paying a mortgage that would make us struggle monthly. The amount of space we need for all of us makes it impossible to have less than a 4 bedroom and just isn’t affordable even with both of our incomes. We made the decision to instead renovate his home! We decided to add a hallway from the back door connecting 2 additional rooms. We got the quote from a contractor and my partner pulled out his entire 401k so we could pay off the full amount and make this work for our family. From the beginning we had small issues with the contractor and how things were being done. A month goes by and we have it fully framed in and almost completed when the contractor demanded more money. He hadn’t even finished what was in the contract and built it incorrectly and out of city spec approval so I couldn’t agree to paying him more for what was already agreed upon up front. We fired him from the remainder of the job and he then informed us he never pulled the right permits, he didn’t have insurance and the contractors license he gave us was fake. We thought he was just trying to scare us into paying him more but he was telling the truth. He didn’t get the building permit, he didn’t have insurance or even a contractors license. In retaliation for firing him he went the city and reported anonymously that there was building being done without permits. Even though he did the work, we are the “owners” and it comes back fully on us. On our door the next day was a stop work order from the city. We weren’t allowed to do anything with the building until the permit was in place. It took us almost 3 weeks to get the permit needed to start finishing the build but because the addition was already almost completely built the city required it be inspected and fixed before continuing. The inspection failed every step down to the footings. The city said we had to completely tear it down and start from scratch. We used all of our money to make this happen and get to where we were just to completely start over has been such a hard hit to us. We don’t have the extra funds to pay a lump sum as we had for the first contractor, so now we are self contracting it in baby steps while still making the payments back to the 401k all while still paying our normal bills and making sure all 5 of our kids needs as well as our own. I’ve already signed out of my lease and don’t have a choice but for all of us to move in together and make it work in a 2 bedroom home. And while regardless of the space we will make it work and do what we can in the meantime. it’s just been very hard for us trying to navigate from here. All of our extra money is going into starting this process over and on top of the stress of everyday life with a full house- we are genuinely struggling. Struggling to restart our addition to the home, struggling on groceries and basic needs for us all and just struggling in general. With Christmas right around the corner and 5 kids any help would be so beneficial to our family!