It can be done, but you cannot work from a mounted file system to alter your
partitions. Use a Live CD and resize your partitions and format new ones from
the free space.
See:
https://help.ubuntu.com/community/Partitioning/Home/Moving
www.ivankuznetsov.com/.../...ts-own-partition.html
http://www.psychocats.net/ubuntu/separatehome

I suspect that it can be done from a graphical interface as well using the Live
CD's Gparted and Users and Groups in System, Administration of your Ubuntu
installation, either by creating a new user or changing your user properties.

It might be wise to backup as you never know...