during the same evening suggested if I give him the first installement of $8K he would get a jump on ordering materials.
That was your biggest mistake right there. If you don't want to become a victim of a contractor's potential insolvency, always pay for work AFTER it clearly belongs to you. That goes for materials as well.
Even if he did everything in good faith and used that $8k check to buy the materials for your job (doesn't really sound like he did, but IF he had), those materials would be legally his until he delivers them to your property (possibly even until he actually installs them, I'm not entirely sure). If he goes into bankruptcy now, those materials would be sold by the trustee and the proceeds distributed among his creditors.
My goal is that he will pay me what it will take to simply finish the job with reimbursement of what he failed to do and I paid for. Should be a simple solution, question is whether he wants to go the simple route or I make claims to his license and bonding company.
You can't insist on cash unless your contract provided for that. You can try insisting he carry out his obligations under the contract by a certain date, but since it sounds like he hasn't even been in contact with an engineer, much less the city (you should be able to call the city building department and find out whether this contractor has applied for any permits for work at your address), this will just be a formality and you shouldn't expect any results from it. I think he has already spent your money on whatever he needed to pay most urgently to avoid (postpone) bankruptcy, so your "simple solution" isn't simple for him at all.
BTW, I am not specifically familiar with the contractor-licensing agency in your state, but typically all you can expect from them is disciplinary action (revocation of his license). This is likely to REDUCE rather than enhance your ability to wring any progress out of him, so in your shoes I would not make involving that agency a priority just yet unless you know they actually help contractors' customers in some direct way (mediation?).
Have you tried asking your lawyer for general advice about what he thinks you should do to salvage what you can from this debacle? If you steered your lawyer the way you steered us here with your questions, you might not have gotten the best bang for your lawyer's-fee buck.
And, just curious, did you get bids from any other contractors? If so, were they all OK with your 3-week schedule? Three weeks including engineering and permitting seems awfully ambitious to me, since the the engineering would normally need to be done first and submitted to the city before the permit would be issued, and the work should not be started until the required permits are in hand. I think the contractor's willingness to agree to that schedule might have been a warning sign.