Discreet, caught in bad fault (7)
I believe the answer is:
tactful
'discreet' is the definition.
('tactful' can be similar in meaning to 'discreet')
'caught in bad fault' is the wordplay.
'caught' becomes 'ct'.
'in' means one lot of letters goes inside another.
'bad' indicates an anagram.
'fault' with letters rearranged gives 'taful'.
'ct' placed into 'taful' is 'TACTFUL'.
(Other definitions for tactful that I've seen before include "Sensitive in dealing with others" , "Sensitive to others' feelings" , "Polite" , "Considerate for other's feelings" , "Showing sensitivity towards others" .)