It sounds like nobody was happy with the outcome of this game session. The point of gaming is, on its most basic level, to have fun together as a group. You aren't having fun. So, you need to change the outcome.
There are a few approaches available.
Ret-Con
This just didn't happen. Maybe you want to "rewind" the whole encounter to a certain point and keep playing. Or, you could choose to re-write parts of the events and outcome such that the characters (except, perhaps the wizard who's happy to die and might have had it coming) managed to get away.
Deus Ex Machina
The events of the past haven't change (much), but some amazing Plot Device comes along right after the fight and saves/resurrects the PCs. Again, the magic might run out before the wizard's turn, if you so choose. You can incorporate this into a new plot thread, with the thing/person which saved the PCs being a new ally, a side-effect of strange phenomena, or even a villain looking for recruits.
Some possible ideas:
- The characters are actually just unconscious. They can wake on their own, or be revived by a helpful NPC.
- The characters are dead, but appear together in an underworld. The story continues with a chance at resurrection (see comments from Iwillnotexist)
- A curious magic in the area brings them back, and now it's time to investigate
Make new characters and start over?
Yeah, you can. If your group really enjoys the gamist aspects of D&D encounters and loaths "breaking the rules", you may decide to live with the results. Changing this event after the fact can reduce the sense of risk for the future, diluting the experience.
If you do want to keep the results and start over with new characters, you may consider starting with a higher level. Maybe go down to 3rd or 4th, so there is a real loss, but you aren't stuck all the way at the start.
However, your dissatisfaction suggests that keeping this outcome isn't satisfying. I don't like do-overs in my stories if I can avoid them (in almost 15 years, I've seldom changed a major event), but in extreme cases it's worth it. Just don't reach for this kind of tool unless there aren't good alternatives.
Involve Your Players
The problem you're trying to solve is a problem for your whole group. In order to solve for everyone, you should get their input on the results. Present the basic options above and discuss how people feel in order choose something that everyone will be happy with.
The GM's Part
As the GM, you're still in the driver's seat here, even with your player's collaboration and input. It's up to you to guide the discussion, hear people out, and end it when you've heard enough to make a final call.
You can still keep some amount of mystery and control over the story. If the players want to rewind, you get to prepare new material to replace the old events. Add in a surprise that will make the new encounter feel fresh and important, instead of a retread. Be extra careful about balancing things and adding in contingencies so that the party feels challenged but isn't going to die again.
If the players want a Deus Ex Machina, you've got lots of creative freedom on what the plot device will be and how it will play out.