Restore iPhone 4, 5.1, 04.12.01

Hello everyone, I have an iPhone with 5.1 software and 04.12.01 firmware. I got this phone from my sister and she has packed it with apps and everything. Its already been unlocked. However i want to know what can i do to format it and restore it from 0 and still be able to unlock it. And if in any case i can update it to a newer software without bricking the phone. Thank you Hamza AlSadr