How can I customize the wp_list_categories

Even if a wp_list_categories filter exists, it passes (and so you have to return) the html markup generated by wp_list_categories() function. This means that if you want use that filter you have to alter the DOM with php, and even if it’s possible (hopefully using external php libraries), sure it’s not the best solution for your needs.
Alternartive are use js to alter html after it was created. It’s a possibility, but I’m a WP developer not a js one, so I’ll give you the Worpress solution.

You have to create a custom Category Walker class and then use it inside a customuized version of wp_list_categories();

Let’s start.

First of all the custom Category Walker class (put it in functions.php):

class My_Category_Walker extends Walker_Category {

  var $lev = -1;
  var $skip = 0;
  static $current_parent;

  function start_lvl( &$output, $depth = 0, $args = array() ) {
    $this->lev = 0;
    $output .= "<ul>" . PHP_EOL;
  }

  function end_lvl( &$output, $depth = 0, $args = array() ) {
    $output .= "</ul>" . PHP_EOL;
    $this->lev = -1;
  }

  function start_el( &$output, $category, $depth = 0, $args = array(), $id = 0 ) {
    extract($args);
    $cat_name = esc_attr( $category->name );
    $class_current = $current_class ? $current_class . ' ' : 'current ';
    if ( ! empty($current_category) ) {
      $_current_category = get_term( $current_category, $category->taxonomy );
      if ( $category->term_id == $current_category ) $class = $class_current;
      elseif ( $category->term_id == $_current_category->parent ) $class = rtrim($class_current) . '-parent ';
    } else {
      $class="";
    }
    if ( ! $category->parent ) {
      if ( ! get_term_children( $category->term_id, $category->taxonomy ) ) {
          $this->skip = 1;
      } else {
        if ($class == $class_current) self::$current_parent = $category->term_id;
        $output .= "<li class="" . $class . $level_class . "">" . PHP_EOL;
        $output .= sprintf($parent_title_format, $cat_name) . PHP_EOL;
      }
    } else { 
      if ( $this->lev == 0 && $category->parent) {
        $link = get_term_link(intval($category->parent) , $category->taxonomy);
        $stored_parent = intval(self::$current_parent);
        $now_parent = intval($category->parent);
        $all_class = ($stored_parent > 0 && ( $stored_parent === $now_parent) ) ? $class_current . ' all' : 'all';
        $output .= "<li class="" . $all_class . ""><a href="" . $link . "">" . __('All') . "</a></li>\n";
        self::$current_parent = null;
      }
      $link = '<a href="' . esc_url( get_term_link($category) ) . '" >' . $cat_name . '</a>';
      $output .= "<li";
      $class .= $category->taxonomy . '-item ' . $category->taxonomy . '-item-' . $category->term_id;
      $output .=  ' class="' . $class . '"';
      $output .= ">" . $link;
    }
  }

  function end_el( &$output, $page, $depth = 0, $args = array() ) {
    $this->lev++;
    if ( $this->skip == 1 ) {
      $this->skip = 0;
      return;
    }
    $output .= "</li>" . PHP_EOL;
  }

}

It extends the WP Walker_Category and overwrite all the 4 methods with something that fits your needs.

After that, in the functions.php put the customized function:

function custom_list_categories( $args="" ) {
  $defaults = array(
    'taxonomy' => 'category',
    'show_option_none' => '',
    'echo' => 1,
    'depth' => 2,
    'wrap_class' => '',
    'level_class' => '',
    'parent_title_format' => '%s',
    'current_class' => 'current'
  );
  $r = wp_parse_args( $args, $defaults );
  if ( ! isset( $r['wrap_class'] ) ) $r['wrap_class'] = ( 'category' == $r['taxonomy'] ) ? 'categories' : $r['taxonomy'];
  extract( $r );
  if ( ! taxonomy_exists($taxonomy) ) return false;
  $categories = get_categories( $r );
  $output = "<ul class="" . esc_attr( $wrap_class ) . "">" . PHP_EOL;
  if ( empty( $categories ) ) {
    if ( ! empty( $show_option_none ) ) $output .= "<li>" . $show_option_none . "</li>" . PHP_EOL;
  } else {
    if ( is_category() || is_tax() || is_tag() ) {
      $current_term_object = get_queried_object();
      if ( $r['taxonomy'] == $current_term_object->taxonomy ) $r['current_category'] = get_queried_object_id();
    }
    $depth = $r['depth'];
    $walker = new My_Category_Walker;
    $output .= $walker->walk($categories, $depth, $r);
  }
  $output .= "</ul>" . PHP_EOL;
  if ( $echo ) echo $output; else return $output;
}

The hard part is done. Now the template code, put it everywhere you need:

<div id="content-filters" class="two columns">
<div class="col tertiary" id="filters">
<?php
$args = array(
  'taxonomy' => 'product_cat',
  'show_option_none' => __('No Menu Items.'),
  'echo' => 1,
  'depth' => 2,
  'wrap_class' => 'product-categories',
  'level_class' => 'pattern_garment_type',
  'parent_title_format' => '<h5>%s</h5>',
  'current_class' => 'selected'
);
custom_list_categories( $args );
?>
</div>
</div>

Customize the $args if you want, I setted them according to you answer code. Only I have changed ‘pattern_garment_type’ to be class and not an id, because you can’t have the same tag id multiple times in html (as in your markup).

That’s all, hope it helps.