Room occupied by old bag (7)
I believe the answer is:
holdall
'bag' is the definition.
(holdall is a kind of bag)
'room occupied by old' is the wordplay.
'room' becomes 'hall' (hall is a kind of room).
'occupied by' is an insertion indicator.
'hall' going around 'old' is 'HOLDALL'.
(Other definitions for holdall that I've seen before include "Largish bag" , "Large strong bag with handles or shoulder strap" , "Handled bag" , "Large bag (no need for another?)" , "Large case, with handles" .)