/usr/sbin/dropbear -p 2222

Preparation
Start by installing the software needed:

sudo apt-get install libpam-mount cryptsetup

Add these line to /etc/initramfs-tools/modules

dm_mod
dm_crypt
sha256
aes_i586

and update the initrd-image with

sudo update-initramfs -u all

Making the encrypted partition
Remember to take BACKUP, because all data at /dev/sda6 will be lost!!!

Now we have to make the encrypted partition, in this example the devices name is /dev/sda6. First we load the needed modules

sudo modprobe dm_crypt
sudo modprobe sha256
sudo modprobe aes_i586

and the make the LUKS-partiton (use your log-in password):

sudo cryptsetup luksFormat /dev/sda6

Now /dev/sda6 has the LUKS format, and can be attached to /dev/mapper:

sudo cryptsetup luksOpen /dev/sda6 encrypted_home

And then we can make a file system on it, here ext3

sudo mkfs.ext3 -j -O dir_index -m 0 -v /dev/mapper/encrypted_home

Finally we can mount the partition, to see if it works

sudo mount /dev/mapper/encrypted_home /mnt

Unmount and close the LUKS partition:

sudo umount /mnt
sudo cryptsetup luksClose encrypted_home

Setting up pam_mount
Insert

auth optional /lib/security/pam_mount.so use_first_pass

into /etc/pam.d/common-auth

and

session optional /lib/security/pam_mount.so

into /etc/pam.d/common-session

Now create a mount point for the LUKS partition

sudo mkdir /encrypted_home
sudo chmod 777 /encrypted_home

And add

volume foo crypt - /dev/sda6 /encrypted_home cipher=aes - -

into /etc/security/pam_mount.conf

This means that every time the user foo logs in, the LUKS partition will be mounted on /encrypted_home, using the password foo entered. Therefor the LUKS password has to be the same as the log in password.

Log out, log in and see if it works :)

This is inspirited by:
http://thomasdamgaard.dk/blog/article/krypteret-swap-og-root-filsystem-med-luks-og-ubuntu