Unless you, the DM, are willing to be flexible in (re)gaining treasure, any character who loses all of his gear should, basically, retire from the party. He simply cannot compete against those high level challenges (unless he's a sorceror or something like that).
I don't doubt that the player in question would also be quite annoyed.
So, to sum up, unless you fancy group members killing other group members and then burning their spellbooks/having them raised as undead and then entombed, right before leaving the group for good then either
a) Don't destroy characters gear
b) Provide some way for the character to get the majority of his gear back