Tanya, are you sharing this closet with someone else? You say "we" so I assume you have to share it with your boyfriend or a roommate (but correct me if I'm wrong). The closet at my apartment is also only about 7'X7' and I share it with my husband (although, I do take up most of it).
I have to say, I agree with Antje about sitting down with your clothes and having a serious sorting out session. My closet used to be completely stuffed with clothes that I just would never wear. There aren't enough days in the year for me to wear all those! I could seriously have worn a completely different outfit everyday for 2 months, and still not worn all the clothing I had (I'm not exaggerating, unfortunately). I felt really uneasy about it too, like I couldn't find anything to wear and it was bursting at the seams and it just really overwhelmed me. I got rid of almost everything! It was painful, too, because I got rid of some really beautiful, brand new (tags still on) clothing, but it just didn't fit my lifestyle or personality anymore, or else I just had never worn it because there other things I would rather wear. I'm not sure if you're at this point, you always look really put together, but you might be glad afterwards that you really sorted through things and have a closet you can get into and is full of only things you really love to wear.
I took some pictures of my closet to maybe give you some ideas about organization.
I hang my belts and stuff on the door. I know you have a sliding door, so this wouldn't work. Maybe you can get some suction cup organizers like they have in the bathroom aisle and suction cup them to one side of your mirrored sliding door (the side that doesn't go behind the other side). You could hang belts, scarves, etc on it, or jewelry (this works in the bathroom as well).
http://i66.photobucket.com/alb.....0245-1.jpg
Also, my husband has a lot of just t-shirts and things (he works in game development so he never dresses up for anything). I went to container store and bought a bunch of hangers that you can "cascade," which is hang the hangers on each other. I picked this trick up working at Express. In our back room we had very little space and organization was key. We can hang about 40 t-shirts in this small area this way:
http://i66.photobucket.com/alb.....0247-1.jpg
Close up of "cascading":
http://i66.photobucket.com/alb.....0248-1.jpg
I have a shelf up high and so I went to Target and bought some of those roller carts and just didn't attach the wheels and put them above. I keep things I don't use much in them, like painting clothes, some workout gear, etc and off season items. I like these because the front is transparent so I can see what's inside. That has been really useful when I'm looking for a specific item:
http://i66.photobucket.com/alb.....0249-1.jpg
I bought a shoe rack, too at Target. I think you would probably need more than one, but they can fit in under clothes that don't touch the ground, like shirts, pants or skirts that are hung on hangers on a higher bar. This space can really be utilized for little things too. Get some bins or something for purses:
http://i66.photobucket.com/alb.....0250-1.jpg
All my dresses and pants and skirts and shorts are all on this bar:
http://i66.photobucket.com/alb.....0251-1.jpg
I put my camis, sleeves and short sleeve more "casual" blouses on the bottom rack on the left side:
http://i66.photobucket.com/alb.....0252-1.jpg
And the long sleeve blouses, cardigans, and blazers on the top. And I could actually move the blazers into the front hall closet with the heavier winter coats if I ran out of room, and move the heavier cardigans into the drawers above with the rest of the winter stuff if I really needed the room:
http://i66.photobucket.com/alb.....0253-1.jpg
So, that's all my clothes. It looks emptier than normal because I haven't done laundry in a week, but all the clothes I have are represented by a hanger, so I know what goes where and how much room I really have. My husband and I also share a dresser where we keep our undies and pajamas. If there is room in your bedroom (and it looks like there might be from the floorplan) I would move the dresser out of the closet. Lots of people have their dresser in the closet, I know, but I really think there are smaller more versatile drawer systems that would fit better and make better use of the space you have.
And do think about downsizing a little bit. We can help!