This bug seems to be solved on Ubuntu 13.04 (and probably newer):
Ensure the encoding is set to use UTF-8:
root@laptop:~# echo $LANG
en_US.UTF-8
root@laptop:~# useradd hâkænശ
root@laptop:~# passwd hâkænശ
Enter new UNIX password:
Retype new UNIX password:
passwd: password updated successfully
root@laptop:~# su - hâkænശ
No directory, logging in with HOME=/
This bug seems to be solved on Ubuntu 13.04 (and probably newer):
Ensure the encoding is set to use UTF-8:
root@laptop:~# echo $LANG
en_US.UTF-8
root@laptop:~# useradd hâkænശ
root@laptop:~# passwd hâkænശ
Enter new UNIX password:
Retype new UNIX password:
passwd: password updated successfully
root@laptop:~# su - hâkænശ
No directory, logging in with HOME=/