How to correct TypeError: Unicode-objects must be encoded before hashing?

I have this error:

Traceback (most recent call last):
  File "python_md5_cracker.py", line 27, in <module>
  m.update(line)
TypeError: Unicode-objects must be encoded before hashing

when I try to execute this code in Python 3.2.2:

import hashlib, sys
m = hashlib.md5()
hash = ""
hash_file = input("What is the file name in which the hash resides?  ")
wordlist = input("What is your wordlist?  (Enter the file name)  ")
try:
  hashdocument = open(hash_file, "r")
except IOError:
  print("Invalid file.")
  raw_input()
  sys.exit()
else:
  hash = hashdocument.readline()
  hash = hash.replace("\n", "")

try:
  wordlistfile = open(wordlist, "r")
except IOError:
  print("Invalid file.")
  raw_input()
  sys.exit()
else:
  pass
for line in wordlistfile:
  # Flush the buffer (this caused a massive problem when placed 
  # at the beginning of the script, because the buffer kept getting
  # overwritten, thus comparing incorrect hashes)
  m = hashlib.md5()
  line = line.replace("\n", "")
  m.update(line)
  word_hash = m.hexdigest()
  if word_hash == hash:
    print("Collision! The word corresponding to the given hash is", line)
    input()
    sys.exit()

print("The hash given does not correspond to any supplied word in the wordlist.")
input()
sys.exit()