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I would let them walk and start the rebuild.
Set Scouting and Player Development to Max.
Get some good starting pitching in free agency or trade if you can afford to. If not, at least look for guys with good movement and decent stuff and stamina, maybe guys who split between the rotation and the bullpen and posted ERAs in the threes. They can be grabbed fairly inexpensively.
Find some undervalued players in the minors, in free agency, off the waiver wire, or on other teams' benches, specifically Gold Glove defenders up the middle (SS, 2B, all outfield) with good contact and speed ratings. Also grab catchers with outstanding blocking and framing skills and at least average contact ratings. They are easily available.
Build from there. The great defense will keep scores low and grab you some wins. Aim to lead the league in defensive efficiency and you'll likely be near the top in ERA even if you don't get great starters at first. Speed can help you eke out some runs. And those players will come a lot cheaper than the power guys. As they develop, you can start looking to upgrade with power.
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